Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
October 5, 2019
Case Laws in this Newsletter:
GST
Income Tax
Customs
Securities / SEBI
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
Companies Law
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G.S.R . 703(E) - dated
30-9-2019
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Co. Law
Investor Education and Protection Fund Authority (Recruitment, Salary and other Terms and Conditions of Service of Deputy General Manager, Private Secretary, Personal Assistant, Stenographer, Senior Secretariat Assistant (SSA) and Junior Secretariat Assistant (JSA)) Amendment Rules, 2019
GST - States
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51/2018 – State Tax - dated
27-9-2019
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Delhi SGST
Lt. Governor of National Capital Territory of Delhi, appoints the 1st day of October, 2018, as the date on which the provisions of section 52 of the the Delhi Goods and Services Tax Act, 2017 shall come into force
Income Tax
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77/2019 - dated
3-10-2019
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IT
Jurisdiction of Income tax Authorities - powers and functions of the Assessing Officer concurrently to facilitate the conduct of e-assessment proceedings
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Classification of goods - rate of GST - goods are Otganic Fertilizers or not - The classification cannot be based only upon what is stated in the pamphlets but the contents of the pamphlets are certainly one of the relevant circumstance which can be taken into consideration while determining classification.
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Release of attached Bank Accounts as well as godown/office and blocking of credit - section 83 of GST - the order of attachment of bank account is prima facie without authority of law, and the order of blocking of credit is not backed by any statutory provision.
Income Tax
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Jurisdiction of Income tax Authorities - powers and functions of the Assessing Officer concurrently to facilitate the conduct of e-assessment proceedings
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Grant of registration to a Trust u/s 12AA - The power of the ITAT are co-extensive with the power of the CIT U/s 12AA - However the said power is not to be exercised as a matter of course and that remand to the CIT is to be made where the ITAT records a divergent view on the basis of material which has been filed before the Appellate Tribunal for the first time.
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Exemption u/s 11 - charitable activities u/s 2(15) - activity of preservation of environment by providing pollution control treatment for disposal of the liquid and solid industrial waste - The words ‘public utility’ or ‘general public utility’ are not capable of a precise meaning. - public utility means public purpose depending upon the context in which it is used in the statute or the Rules.
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TDS u/s 195 - fees for technical services - receipt of services outside India - setting up a new office and godown for the purpose of boosting its exports - Business connection - the same has not accrued or arisen in India and hence, no tax need be deducted u/s 195
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Once the assessee is governed by the principle of mutuality, even if there are difference class of members, some of whom are not entitled to vote, the club would not be cease to be governed by principle of mutuality.
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Permanent Establishment - Car is manufactured by the Audi AG outside India and constitutes a separate and independent activity. As noted earlier the car is sold to VW Group for further sale in India and VW Group sale is not acting on behalf of Audi AG nor is Audi AG selling cars through VW Group sales. - AO was not justified in invoking section 9 of the Act and the Article 5 of Indo-Germany Tax Treaty for taking view that assessee has PE in India.
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Revision u/s 263 - Unexplained cash credits - Mere fact that the payment was received by cheque or that the applicants were companies, borne on the file of Registrar of Companies were held to be neutral facts and did not prove that the transaction was genuine - additions with penalty confirmed.
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Taxability of professional goodwill - the revenue has not established that the assessee was managing the whole or substantially the whole of the affairs of the company - the amount received by the assessee is neither chargeable under sec. 28(ii)(a) nor under the head capital gain.
Customs
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IGST refunds-mechanism to verify the IGST payments for goods exported out of India in certain cases
VAT
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Classification of goods - compressed air and cooled air - the entry No. 55 Part III Schedule II is very specific and clear on the subject as all type of gases such as Oxygen and Nitrogen are covered under it and air which is also a mixture of Oxygen and Hydrogen and some other gases are also included.
Case Laws:
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GST
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2019 (10) TMI 157
Classification of goods - rate of GST - AUTUS - SJ-NINJA - SJ-ERASER - OPRAX - TELNAR - VK s NEMO - STRESSOUT - SHYAM SAMRUDDHI - goods are Otganic Fertilizers or not. Product AUTUS - HELD THAT:- Autus satisfy all the ingredients of plant growth regulators (PGR) and therefore classifiable under Tariff Heading 3808 with applicable GST @ 18%. Product SHYAM SAMRIDDHI - HELD THAT:- The plant nutrient such as N, P, K are derived from organic source. The product is also certified by the Accredited Certified Agency as Organic Products. The product does not contain any other growth regulator as suchh the product is Organic fertilizer classifiable under HSN 3105 and liable to GST @ 5% as per Sr. No. 182D of Schedule-I of N/N. 1/2017-CT (Rate) dated 28.06.2017. PRODUCT SJ-NINJA - HELD THAT:- From the mode of action and the salient feature of the products, it is found that the product satisfy all the attributes of an insecticide and hence the produce is an insecticides covered by HSN 3808 liable to GST @ 18%. Product SJ-ERASER - HELD THAT:- From the use of product, it can be concluded that the product is an organic insecticide falls under HSN code 3808. Further, the presence of nutrient in small quantity will not alter the essential character of the product as an insecticide liable to GST @ 18%. Product QPRAX - HELD THAT:- The product is an Organic Fungicide falling under HSN 3808 liable to GST @ 18%. Product TELNAR - HELD THAT:- The product is advertised by the appellant as broad spectrum organic bactericide. There is no doubt that the product is Organic Bactericide-Pesticide covered under Tariff Heading 3808 liable to GST @ 18%. Product VK's NEMO - HELD THAT:- From the literature and the use of product, it can be said that the product is nematocides covered under Tariff Heading 3808 liable to GST @ 18%. Product STRESSOUT - HELD THAT:- Having regard to publicity literate, its content, the mode of action, the product falls under HSN Code 3808 @ 18%. For classification, reliance placed in the case of KULKARNI BLACK AND DECKER LTD. VERSUS UNION OF INDIA [ 1991 (7) TMI 95 - HIGH COURT OF JUDICATURE AT BOMBAY ] where it was held that The classification cannot be based only upon what is stated in the pamphlets but the contents of the pamphlets are certainly one of the relevant circumstance which can be taken into consideration while determining classification. Thus, Products namely AUTUS, SJ-NINJA, SJ-ERASER, OPRAX, TELNAR, VK s NEMO AND STRESSOUT are classifiable under HSN Code-3808 and liable to GST (SGST CGST 9% as per Notification-1 of 2017-CT (Rate) dated 28.06.2017 each respectively. The product SHYAM SAMRUDDHI is an organic fertilizer classifiable under HSN-3105 and liable to GST @5% as per Sr. No.182D of Schedule-I of Notification-1 of 2017-CT (Rate) dated 28.06.2017.
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2019 (10) TMI 156
Release of attached Bank Accounts as well as godown/office and blocking of credit - section 83 of the Central Goods and Services Tax Act, 2017 - HELD THAT:- Section 83 of the CGST Act empowers provisional attachment of property, subject to pendency of the proceedings under sections 62, 63, 64, 67, 73 or 74 of the CGST Act. The same does not contemplate, and rightfully so, provisional attachment pending any proceeding under section 83 of the CGST Act, inasmuch as, there can never be any proceeding pending under section 83 of the CGST Act as the same only empowers the State authorities to provisionally attach the property of a taxable person, subject to the provisions of section 83 being satisfied - It appears that the exercise of powers under section 83 of the CGST Act, whereby the bank account of the petitioner has been attached is totally without any authority of law. Blocking of the credit of ₹ 6,63,51,380/- available in the electronic credit ledger of the petitioner - HELD THAT:- The learned Assistant Government Pleader even with the assistance of the instructing officer is not in a position to point out any provision of law which empowers the respondent authorities to block the credit. Attachment of godown/office - HELD THAT:- The learned Assistant Government Pleader has submitted that the respondents would open the seal. Having regard to the fact that the order of attachment of bank account is prima facie without authority of law, and the order of blocking of credit is not backed by any statutory provision, the respondents are directed to forthwith withdraw the attachment of the bank account of the petitioner with the IDBI Bank, Prahladnagar Branch and to unblock the credit of ₹ 6,63,51,380/- available in the electronic credit ledger forthwith. Stand over to 17th October, 2019.
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2019 (10) TMI 155
Release of attached Bank Accounts of petitioner - section 83 of the Goods and Services Tax Act, 2017 - HELD THAT:- The grievance raised in the petition do not survive - petition disposed off.
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2019 (10) TMI 153
Release of seized vehicle with goods - Section 130 of the Central Goods and Services Tax Act, 2017 - HELD THAT:- Issue Rule, returnable on 17.10.2019.
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Income Tax
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2019 (10) TMI 151
Power and jurisdiction of the Appellate Tribunal u/s 254(1 ) - Power of the Appellate Tribunal co-extensive with the power of the Commissioner under Section 12 (AA) Grant of registration to a Trust u/s 12AA - Whether ITAT while hearing Appeal in a matter where registration under Section 12AA has been denied by Commissioner Income Tax can itself pass an order directing Commissioner to grant registration or should leave the matter to be considered by Commissioner Income Tax to consider matter afresh giving rise to further litigation in the matter? HELD THAT:- In view of the unfettered power of the Appellate Tribunal in terms of section 254 (1) of the Act, 1961 the Tribunal can very well record its satisfaction on the genuineness of the activities and object of the Trust and can very well direct registration of the Trust without remand of case to the Commissioner in case such satisfaction is recorded on the basis of documents and material already available on record at the stage of examination by Commissioner. It would be a different matter where the Appellate Tribunal records such satisfaction on the basis of material or documentary evidence which was not available before the Commissioner while exercising his powers under Section 12 (AA) of the Act, 1961, which is our opinion would require remand. Remand to the Commissioner can also be affected in a case where the Commissioner rejects the application on a technical ground without recording its opinion on facts or genuineness of the activities and object of the Trust but the Tribunal finds ground for rejection on such technical ground thereby reopening the issue of recording satisfaction in terms of Section 12 (AA) of the Act, 1961. It is clear that the power and jurisdiction of the Appellate Tribunal under Section 254(1) of the Act, 1961 is unfettered thereby enabling the Appellate Tribunal to direct registration of the Trust at its level itself but the same is not open as a matter of course and such power is to be exercised only in circumstances indicated herein above. Onus on the Appellate Tribunal to remand the matter in cases indicated herein above is also in view of the strict interpretation of the powers of the Commissioner under Section 12 (AA) of the Act, 1961 because if the Appellate Tribunal is given such wide powers to direct registration of Trust in all or any circumstances, it would render the provisions of Section 12(AA) otiose, which again can not be the intention of legislature. Order :- (i) The income tax Appellate Tribunal while hearing an Appeal under Section 254(1) in a matter where registration under Section 12(AA) has been denied by Commissioner income tax can itself pass an order directing commissioner to grant registration in case the income tax Appellate Tribunal disagrees with the satisfaction of the Commissioner on the basis of material already on record before the Commissioner. However the said power is not to be exercised as a matter of course and that remand to the Commissioner income tax is to be made where the income tax Appellate Tribunal records a divergent view on the basis of material which has been filed before the Appellate Tribunal for the first time. Remand for determination of question regarding grant of registration to a Trust would also be necessitated in cases where the registration application has been rejected by the Commissioner income tax on technical grounds without recording his satisfaction as contemplated under Section 12 (AA) of the Act, 1961 and such decision is overturned by the income tax Appellate Tribunal. (ii) The power of the Appellate Tribunal are co-extensive with the power of the Commissioner under Section 12 (AA) of the Act, 1961 subject to what has been indicated herein above. However order for registration can be issued only after recording satisfaction with regard to genuineness of activities of the Trust as provided under Section 12 (AA) of the Act, 1961.
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2019 (10) TMI 150
Exemption u/s 11 - Registration u/s 12AA denied - charitable activities u/s 2(15) - activity of preservation of environment by providing pollution control treatment for disposal of the liquid and solid industrial waste - HELD THAT:- Just because the members of the assessee company, in the case on hand, are being benefited and their statutory liability is being discharged by the assessee company, by itself, would not be sufficient to hold that the company could not be said to have been set up for charitable purpose. Merely because a fee or some other consideration is collected or received by an Institution, it would not lose its character of having been established for a charitable purpose. It is also important to note that we must examine as to what is the dominant activity of the institution in question. If the dominant activity of the institution was not business or trade or commerce, then any such incidental or ancillary activity would also not fall within the categories of the trade, commerce or business. It is clear from the facts of the present case that the driving force is not the desire to earn profit, but the object is to promote, aid, foster and engage in the area of Environment Protection, abatement of pollution of various kinds such as water, air, solid, noise, vehicular etc. without limiting its scope. In short, the main object appears to be preservation and protection of environment. The Latin word utilis means useful, beneficial, equitable, available . Chambers Dictionary of English defines utility as useful: power to satisfy the wants of people in general: a useful thing, public utility: public service or a company providing such public service. According to New Oxford Dictionary of English (1998), as a Noun, utility is the status of being useful, profitable or beneficial. The words public utility or general public utility are not capable of a precise meaning. The question whether service is public utility or not has to be discharged in the context of different situations but it is, as considered infra, well settled that public utility means public purpose depending upon the context in which it is used in the statute or the Rules. Indeed, in some decisions, public utility is considered very similar to one for public purpose The CIT (A) and the Income Tax Appellate Tribunal have concurrently held that taking an overall view, the dominant objects of the assessee are charitable as the dominant object is not only preservation of environment, but one of general public utility and, therefore, the assessee is entitled to seek exemption under Section 11 of the Act. The Tribunal is the last fact finding body. As a principle, this Court should not disturb the findings of fact in an appeal under Section 260A of the Act unless the findings of fact are perverse.- Decided in favour of the assessee and against the revenue.
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2019 (10) TMI 149
Assessment u/s 153A - addition of cash paid for property purchased - HELD THAT:- The assessee did not produce any receipt executed in favour of the purchaser of ₹ 8 lakhs. No reasons have been explained why the cash of ₹ 8 lakhs have been received. Further no evidence have been produced on record with respect to availability of ₹ 8 lakhs in cash with the buyer of the garage. Further cheque payment of ₹ 9 lakhs have been made in March, 2006 and September, 2006, but, the Agreement to Sell of the garage is Dated 15.04.2006 which has no co-relation with the payments for purchase of the Flat at Hyderabad. The assessee failed to prove the genuineness of the execution of the Agreement to Sell Dated 15.04.2006. The alleged purchaser has not filed any confirmation before the authorities below. Considering the totality of the facts and circumstances of the case and incriminating document found during the course of search to show that assessee has initially declared lesser value of the Flat, but, when seized document was found during the course of search which shows assessee has paid higher value of the flat. It, therefore, appears assessee has created a story of payment of ₹ 8 lakhs on receipt of ₹ 8 lakhs for sale of garage. The preponderance of the probability do not support the case of the assessee at all. Conduct of the assessee prior to the search and after search clearly disentitle the assessee for any relief. No interference is required in the mater. We, therefore, confirm the Orders of the authorities below and dismiss the appeal of assessee.
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2019 (10) TMI 148
Gain accrued on disposal of shares - Capital gains OR Business income- chargeable to tax u/s 111A - HELD THAT:- We are of the considered view that the assessee is entitled for claiming/charging of gains under the provisions contained u/s 111A of the Act, consequently the issue is set aside to the AO to accept the claim of the assessee by giving benefit of charging of short term capital gain to tax u/s 111A of the Act after due verification. Consequently, grounds no.1, 2, 3 4 are determined in favour of the assessee. Addition on account of STT paid on the ground that the assessee has not filed certificate from NSE/BSE in respect of STT paid and thereby denied the credit to the assessee - HELD THAT:- It is categoric case of the assessee that when the assessee himself has added back the STT paid by disallowing the expenses in its computation of income, the addition is not sustainable. But AO as well as ld. CIT (A) have dealt with the issue without looking into the facts pleaded by the assessee. So, the issue is set aside to the AO to decide accordingly in view of the stand taken by the assessee and on the basis of computation of income filed by the assessee after providing adequate opportunity of being heard to the assessee. Issue decided in favour of the assessee for statistical purposes.
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2019 (10) TMI 147
Penalty u/s 271(1)(c) - addition by changing the Most Appropriate Method (MAM) from TNMM to CUP by the TPO - whether the assessee has concealed particulars of income or has furnished inaccurate particulars of such income during assessment proceedings? - HELD THAT:- It is settled principle of law that when substantial question of law has been framed by the Hon ble High Court in the appeal filed by the assessee challenging the addition confirmed by the Tribunal, the issue become debatable and no penalty in such circumstances can be levied. Hon ble Delhi High Court in case of CIT vs. Liquid Investment Trading Co. [ 2010 (10) TMI 1021 - DELHI HIGH COURT] confirmed the order passed by the Tribunal setting aside the penalty confirmed by the ld. CIT (A) u/s 271(1)(c) on the ground that the issue has become debatable - We are of the considered view that the penalty levied by the AO and confirmed by the ld. CIT (A) for AYs 2007-08 2008-09 is not sustainable in the eyes of law, hence ordered to be deleted. Consequently, appeals filed by the assessee are allowed.
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2019 (10) TMI 146
Disallowance on account of Guarantee Fee on Bonds - Interest on FDR made out of un-utilised funds provided by COP CCS (Govt Organization) - HELD THAT:- It is well settled Law that addition shall have to be made in assessment year to which it pertain. May be assessee has wrongly offered the impugned amount for taxation in subsequent A.Y. 2013-2014 would not absolve the assessee from its liability to pay tax in assessment year under appeal. Assessee earned interest of the impugned amount against the FDRs which were made out of the funds which remain un-utilised. Therefore, the principal amount remain with the assessee which is to be utilised by the assessee of its own. If interest is earned on the same and certified by the Statutory Auditor that it is income of the assessee, it has to be shown as income in assessment year under appeal only. Merely because assessee has shown the impugned amount as taxable in A.Y. 2013-2014 would be of no consequence. No justification to interfere with the Orders of the authorities below. Assessee was directed to produce the policy of the Government of India through which the amount have been given to assessee and the conditions stipulated therein to refund back the amount along with interest so as to clarify the position taken by the assessee before the authorities below. However, Learned Counsel for the Assessee has shown his inability to produce any such policy or circular for consideration of the Bench. In these circumstances, it is clear that interest earned on FDRs was income of the assessee from other sources as is held by the authorities below, which was ultimately agreed by the assessee to be surrendered for taxation though in subsequent year. No interference is called for in the matter. We, accordingly, dismiss the appeal of assessee.
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2019 (10) TMI 145
Additional depreciation u/s 32 - CIT(A) dismissed the ground of appeal on the ground that some of the items like; payment for factory visit, payment for vehicle charges, payment for inspection are not relating to plant and machinery, and therefore, could be considered for additional depreciation - HELD THAT:- Assessee submitted that the amount which has been incurred for purchase and installation is reproduced in the impugned order that includes interest on bank term loan which has been capitalized from the month of April to month of October. Further expenditure have been incurred on the insurance. We find that so far as the interest and insurance is concerned same is verifiable from records hence the Assessing Officer would delete this addition however, in respect of the other expenditure the Assessing Officer would verify whether this expenditure is related to installation of the plant and machinery and would delete if it is found to be incurred for the said purpose. The ground raised in appeal is allowed in the terms indicated above.
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2019 (10) TMI 144
Addition on account of commission paid - related party transaction - HELD THAT:- In the absence of any rebuttal on relevant facts namely; that Shri Abhay Pal Jaswal and Ms. Shilpi Tandon were non related parties to whom payments had been made through banking channel on which TDS stood deducted and TDS returns stood filed. Copies of their Income Tax Returns were made available. Sales effected by these agents in specific areas to specific parties has been identified and confirmed by the parties which have been referred to in detail in the submissions extracted from the impugned order, none of these facts and evidences have been assailed by the Revenue. No reason has been set out in the order why these be discarded especially in facts where the assessee consistently states that since these parties were no longer associated with the assessee, he had no authority to command their presence. Their affidavits are available on record. In the circumstances, the argument advanced on behalf of the assessee as per record, it is seen is that the assessee was under a bonafide belief that the explanation offered supported by way of affidavits etc. was sufficient, to discharge the burden of proof cast upon him. In case the evidence in the face of assessee's inability to produce the parties with whom the assessee had no further interaction and infact had no authority to command their presence was to be discarded or disbelieved. If their presence was so necessary, AO could have exercised his powers to summon them. It is seen that neither the evidence is discredited nor the affidavits available on record have been upset. In the circumstances, in the absence of any rebuttal on the evidences on record, the AO, it appears merely ignored these evidences and insisted on the presence of the parties. The said exercise in all fairness cannot be justified. It is not a case that the parties were not available at the addresses provided by the assessee. AO having failed to issue summons or rebut the evidences, in these peculiar facts and circumstances, cannot be said to be justified in making the addition. These infirmities in the order passed have been assailed by the assessee in appeal, however, the CIT(A) also not cared to address them and has confirmed the additions solely on the ground that the parties were not produced ignoring the fact that the assessee had no authority to command their presence. The evidences relied upon in support of the claim and the submissions extracted in detail in the impugned order, it is seen have not been assailed or upset. Being satisfied with the explanation advanced for the reasons set out hereinabove, it is directed that the additions made by way of disallowance on account of these two parties i.e. Shri Abhay Pal Jaswal and Ms. Shilpi Tandon are to be deleted. - Appeal of the assessee is allowed.
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2019 (10) TMI 143
Taxability of interest received on enhanced compensation on compulsory acquisition of land u/s 28 of the Land Acquisition Act, 1894 - interest taxable u/s 56 or in the nature of compensation which was exempt from capital gain tax u/s 10(37) - HELD THAT:- Undisputedly the interest amount had been received u/s 28 of the Land Acquisition Act, 1894. We find that the nature of the said interest and its taxability had been settled by the Hon'ble Apex Court in its decision in the case of Ghanshyam, HUF [ 2009 (7) TMI 12 - SUPREME COURT] which has been reiterated by the apex court in the case of Gobind Bhai Mamaiya [ 2014 (9) TMI 587 - SUPREME COURT] and Hari Singh Others [ 2017 (11) TMI 923 - SUPREME COURT] holding the same to be in the nature of compensation taxable as such. We hold that the interest received by the assessee during the impugned year on the compulsory acquisition of its land u/s 28 of the Land Acquisition Act, is in the nature of compensation and not interest which is taxable under the head income from other sources u/s 56 of the Act as held by the authorities below. The compensation being exempt u/s 10(37) of the Act is not disputed. In view of the same the order passed by the CIT(Appeals) upholding the addition made by the AO on account of interest on enhanced compensation is not sustainable. - Decided in favour of assessee
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2019 (10) TMI 142
Validity of reopening of assessment u/s 147 - notice issued u/s 148 is not in accordance with law - no valid service of notice - AR argued that the AO has not served the notice u/s 148 to the assessee for both the assessment years - procedure to serve notice by affixture - HELD THAT:- In the instant case, the department could not place any evidence to show that the department has made the efforts to serve the notice in person. There was no evidence of having made the efforts to serve the notice either by post or through notice server. Though there was a report of inspector having served the notice by affixture, there was no panchnama drawn by inspector for service of notice by affixture, specifying the place which is being witnessed by independent witnesses. The notices u/s 148 bear the signature of two witnesses without the details of names and addresses. There was no endorsement on the notices having served the notices by affixture. Without the proper endorsement having served the notice by affixture in the presence of local person identifying place of the assessee, the same cannot be held as valid service. Similarly though the AO has stated to have served the notice u/s 142(1) also by affixture, no evidence was brought on record to show that the notices were served by affixture in the presence of independent witnesses. Perusal of the information shows that there was no independent local person as witness and there is no evidence identifying the place as belonging to the assessee before such affixture. In the instant case, though the letters have stated to have been issued from 2013 onwards and the correct address could not be located, subsequently, it is observed that the assessment order and the demand notices were served on the assessee on the same address which shows that the department has not made proper efforts or the enquiries to locate the assessee. From the above, it is established that the department did not make proper service of the notice as per the procedure laid down in the Code of Civil Procedure. - Decided in favour of assessee.
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2019 (10) TMI 141
Excess cane price paid by the assessees to sugarcane suppliers/ members, i.e. the price over and above the Statutory Minimum Price (SMP) fixed by State Government for purchase of cane - HELD THAT:- In view of the statement made by both the sides that the facts in the present set of appeals are identical, the issue relating to excess sugarcane price paid by the assessee is restored to the file of Assessing Officer with similar directions as above in the case of Majalgaon Sahakari Sakhar Karkhana Ltd. Vs. ACIT [ 2019 (3) TMI 906 - ITAT PUNE] . AO shall decide the issue after affording reasonable opportunity of hearing to the respective assessee, in accordance with law. Treating Advance Lease rent received as income for the year - HELD THAT:- As perused the lease agreement and further relevant documents related to this case. The observation of the CIT(Appeals) is not correct that in the event of termination of lease agreement, the money will be retained by the assessee and therefore it needs to be taxed as income of the assessee. This is so because, first of all the termination of the lease agreement should take place and it takes place since certain important duties which were casted upon the lessee company has not been performed by them. That for non-performance, it is quite possible that some loss or damages may arise to the lessor assessee for which the relevant clause emanates the lessor company to forfeit the advance money received from the lessee company to cover up such loss or damage as the case may be. That further, on reading totality of facts along with the indemnity Clause, the advance amount paid for lease cannot be treated as income of the assessee in the given facts and circumstances.
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2019 (10) TMI 140
Validity of assessment u/s 153A - as alleged assessment proceedings for the year under consideration has not abated and no incriminating material relating to the same was found in search - HELD THAT:- This Tribunal is taking a consistent view by following various binding precedents that in absence of any incriminating material found or seized during the course of search, the addition cannot be made by the A.O. in the proceedings u/s 153A of the Act when the assessment for the year under consideration was not pending as on the date of search. Thus, following the earlier decision of this Tribunal as well as judgment of the Hon ble Jurisdictional High Court and the other judgments relied upon by the ld AR, hold that the addition made by the A.O. on account of agricultural income treating the same as income from other sources in absence of any incriminating material is not sustainable and the same is deleted. - Decided in favour of assessee.
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2019 (10) TMI 139
Rectification u/s 254 - finding of the Tribunal that the assessee could not establish the live link between the withdrawals from bank and cash found at the time of search is erroneous finding of fact - HELD THAT:- Since the assessee had drawn our attention to the findings of the revenue officers that the cash balances withdrawn from the bank were sufficient to explain the cash found in the hands of Shri KRV Uday Charan Rao and Shri Premsagar Rao, but was disallowed only for the reason that the assessee failed to establish the cash found with the source, we deem it fit and proper to modify the last 5 lines of para 12 of ITAT order. The following sentences shall be substituted: Since both the AO and the CIT(A) have verified the cash and bank statements and have come to the conclusion that the assessee could not explain the sources for the cash found at the time of search, and even before us, the assessee could not establish the live link, we see no reason to interfere with the order of the CIT(A). Thus, ground no.4 raised by the assessee company is accordingly rejected. by the following lines: Since both the AO and CIT(A) have made the addition on the ground that the assessee could not establish the live link, we are of the opinion that if the assessee is able to satisfy that there were sufficient bank withdrawals to explain the funds in their hands, no addition can be made. Therefore, we deem it fit and proper to remand this issue to the file of the AO for reverification of the issue.
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2019 (10) TMI 138
Condonation of delay - delay for filing by 32 days - application seeking condonation of delay has been filed stating that the delay was unintentional since the management was tied up with the compliance in new GST regime and the staff who was handed over the work of preparing the appeal and filing it, fell sick. A Duly sworn affidavit of the Director of the assessee company, stating the aforesaid facts on oath was also filed before us - HELD THAT:- The affidavit which brings out the reason for the delay merely states that the staff responsible for filing the appeal fell sick not once but twice. There is no mention of the name of the concerned staff. There is no evidence of his having fallen sick except for that the Director has stated the said fact on oath. It appears that there is total lack of sincerity on the part of the assessee regarding such serious matters, as filing appeals, which is evident from the fact that it had left all the work relating to the filing of the appeal to some of its staff which time and again fell sick and no conscious and deliberate effort was even made by the assessee to find out whether the appeal was filed or not. It was only when the Department raised a demand that the assessee woke and filed the appeal. But considering the smallness of the delay, the reasons stated on oath by the Director of the assessee company and in the interest of justice we condone the delay Deduction u/s 80IC denied - not adhering the provision of section 80AC - return filed in the impugned case was beyond the due date as specified u/s 139(1) - HELD THAT:- It has not been disputed at any stage that the law mandates the filing of return claiming the impugned deduction by the due date of filing of return as per section 139(1) of the Act. It is also an admitted fact that the return filed in the impugned case was beyond the due date as specified u/s 139(1) of the Act. The CIT(A), we find, has referred to decision of Saffire Garments [ 2012 (12) TMI 193 - ITAT RAJKOT] , the ITAT Kolkatta Bench in the case of Singhal Enterprises Pvt. Ltd. [ 2019 (5) TMI 1023 - CESTAT NEW DELHI] . The ITAT Chandigarh Bench in the case of Lakshmi Energy Foods Limited [ 2015 (10) TMI 986 - ITAT CHANDIGARH] and other decisions of the ITAT, directly on the issue while upholding the disallowance. No contrary decision has been brought to our notice by way of any written submission filed or otherwise. In view of the same, we hold, that the ratio laid down in the said decisions has been rightly applied by the CIT(A) in the present case, disallowing the claim of deduction u/s 80IC of the Act - Appeal of the assessee is dismissed.
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2019 (10) TMI 137
Levy of penalty u/s 271(1)(c) - addition made during the assessment proceedings u/s 41(1) - as outstanding credit balance in the accounts of two parties, holding that the same had ceased to exist - HELD THAT:- In the present case we find that both the requirements of the section are not fulfilled. The Ld.CIT(A) himself has recorded a finding of fact that the impugned liabilities do not represent any trading liability since the assessee had never commenced business and had therefore never incurred any operational expense or earned any income. CIT(A) has gone on to mention the assesses explanation that these liabilities represented advances given by the two creditors for setting up business of the assessee, but has not controverted the same nor found any falsity in the same. Therefore even as per the Ld.CIT(A) the liabilities did not represent any expense, allowance or loss claimed earlier by the assessee. Further we find that that there is nothing on record to show that the liabilities ceased to exist in the impugned year. In fact we find the assessee had contended that the parties had written off the amounts in earlier years. And on the basis of this admission of the assessee the Revenue derived that the liabilities ceased to exist, but there is no finding, when. The entire case of the Ld.CIT(A) for treating the same as income u/s 41(1) of the Act, rests on the fact that the amounts represent liabilities and the facts demonstrate that they cease to exist. But this is not sufficient to treat the amount as profits and gains of business for the year as required by section 41(1), as pointed out above by us. There was no legally sustainable basis with the Revenue for making the addition u/s 41(1) of the Act. As a corollary therefore it cannot be said that the assessee had furnished inaccurate particulars of income or concealed particulars of income in relation to the addition made, so as to attract levy of penalty u/s 271(1)(C) of the Act. The penalty so levied is therefore directed to be deleted. - Decided in favour of assessee.
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2019 (10) TMI 136
Validity of the final assessment orders passed as barred by limitation - order passed under section 254 - reference was made to the Transfer Pricing Officer under section 92CA(1) - Applicability of the limitation prescribed under section 153(2A) - HELD THAT:- When the statute provides period of limitation for passing assessment, re assessment, re computation by enacting specific provisions, the Assessing Officer is certainly bound by the limitation prescribed therein. In the facts of the present case, undisputedly, the impugned assessment orders have been passed beyond the period of limitation prescribed under section 153(2A) of the Act. Even, the Revenue has not been able to overcome the aforesaid factual position. Further, no contrary decision has been brought to our notice by the learned Departmental Representative to indicate that the provisions of section 153(2A) of the Act is not applicable to the facts of the present case. In view of the aforesaid, since, the impugned assessment orders have been passed without following the mandate of section 153(2A) of the Act, which, in our view, could not have been bypassed, the assessment orders have to be declared as barred by limitation, hence, invalid. Accordingly, we have no hesitation in quashing the assessment orders passed for the assessment years 2008 09 and 2009 10. Grounds raised by the assessee on the issue are allowed. Addition made on account of transfer pricing adjustment made in respect of provision of business support service to AE - Selection of MAM - determination of arm's length price of Business Support Services provided to AE by applying internal CUP is correct or not ? - HELD THAT:- Admittedly, the assessee has benchmarked the provision of business support services applying TNMM. It is also observed, in subsequent assessment years i.e., A.Y. 2012 13 and 2014 15, the assessee had benchmarked the provision of business support service to the AE, applying TNMM and the Transfer Pricing Officer has accepted it. Thus, from the aforesaid facts, it can be concluded that when no external CUP is available, as submitted by the learned Counsel for the assessee and as has been admitted by the Transfer Pricing Officer, the transaction has to be benchmarked by applying TNMM, as, it is the most appropriate method under the given facts and circumstances of the case. The only issue which now requires deliberation is the acceptability or otherwise of the comparables selected by the assessee under TNMM. As could be seen from the facts placed before us, the comparables selected by the assessee were also selected in subsequent assessment years i.e., A.Y. 2011 12, 2012 13 and 2014 15 and the Transfer Pricing Officer accepted these comparables in the A.Y. 2012 13 and 2014 15. Keeping in perspective of the aforesaid factual position, we direct the Assessing Officer to verify the function, asset, risk (FAR) of the comparables selected by the assessee and thereafter determine the arm's length price by applying TNMM. For the aforesaid reasons, we set aside the assessment order on the issue with a direction to the Assessing Officer to determine the arm's length price of business support service provided to the AE by applying TNMM as the most appropriate method and following our observations hereinabove. If the comparables selected by the assessee are found to be good comparables, they should be accepted.
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2019 (10) TMI 135
Undisclosed investment in purchase of land - assessments year - reliance on the preliminary statement recorded during search - transaction took place in 2007-08, but documents were registered in 2010 - HELD THAT:- As submitted documents is not doubted. Even in the registered sale deed dated 25.03.2010 the reference to the consideration of ₹ 5,50,000/- is mentioned which relates to the date of agreement 24.7.2007 when the seller received the sale consideration of ₹ 5,50,000/- from the assessee. All these set of documents are ascertaining the fact that the transaction of purchase took place during Financial Year 2007-08 when the consideration of ₹ 5,50,000/- was paid by the assessee with the joint owner to the seller. Though the assessee s husband has given a statement of having purchased the said land of around ₹ 10,00,000/- before 4 years but as contended by the Ld. Counsel for the assessee this was a preliminary statement which was recorded before the start of actual search therefore cannot be accepted as a statement u/s 132(4) of the Act. Even otherwise the written submissions are better evidence over the oral statements. We therefore of considered view that the alleged transaction of purchase of land during Financial Year 2007-08 for consideration of ₹ 5,50,000/- and possession was taken during Financial Year 2007-08 only. Since the assessee has already declared her investment at the said land at ₹ 3,90,000/- (being 50% of ₹ 7,80,000/-), we find no reason to sustain the addition of ₹ 2,25,000/- in the hands of the assessee. - Decided in favour of assessee Addition of Gold Jewellery 204.869 Gms, silver articles weighing 3.944 kgs and diamond jewellery - HELD THAT:- As regards the addition confirmed for gold jewellery 204.869 Gms is concerned we find no inconsistency in the order of Ld. CIT(A) who had given the benefit of 950 grams of gold (500 gms per married lady, 250 grams for unmarked lady (daughter) and 100 grams for male member (husband and son). Addition for silver articles - we are of the considered view that in the Indian customs at the time of marriage along with gold jewellery silver utensils/articles are also gifted which are given with the object for use during the normal course of life and not considered in the category of gold jewellery or ornaments. The CBDT Circular No.1196 dated 11.5.1994 only refers to gold jewellery and ornaments. Therefore making the addition for such gifted articles only on the premise of the CBDT Instruction No.1916 dated 11.5.1994 which only talks about golden jewellery and ornaments is uncalled for however authorities should not been denied the claim as such silver articles were gifted at the time of her marriage which was around 15 years before the date of search. Thus looking to the family living standard are of the considered view that the silver weighing 3.944 kg and diamond jewellery valued at ₹ 27,000/- cannot be treated as un explained in the given fact that the assessee process 1154.869 grams of gold jewellery Undisclosed cash deposit - HELD THAT:- The claim of the assessee that the cash was received from sale of agriculture land at Satna is verifiable from the documentary evidence placed at page 16-26 of the paper book showing the details of agriculture land situated at village Satna in the name of assessee s mother Smt. Sudha Jain. Further it is claimed that the amount was immediately transferred to Smt. Sudha Jain is also verifiable from the bank statement. Smt. Sudha Jain has used the amount for renovation of residential duplex house which is also supported by the documentary evidence placed - case the assessee s submission before the Ld. A.O and Ld. CIT(A) in order to explain the source is duly backed by documentary evidence and cannot be treated as a cooked story. Therefore since the source is duly explained, we find no justification in the action of the Ld. A.O making the addition. Undisclosed on money payment to Mr. Shardendu Mishra - assessee purchased the land on 7.6.10 measuring 4674 sq.ft plot situated at Gram Borda, Bhopal - HELD THAT:- We observe that the statement given by Mr. Shardendu Mishra is supported with the fair market value of ₹ 4,78,000/- adopted by the Stamp Valuation Authority. We therefore find force in the finding of Ld. A.O and Ld. CIT(A) who has rightly made the addition of ₹ 2,00,000/- for the on money payment for purchase of land. With regard to alternate claim of the assessee that ₹ 2,00,000/- has been offered to tax in the computation of income under other income and telescoping benefit should be given for the alleged addition for on money payment. This claim was never made before the Ld. A.O nor before Ld. CIT(A). This is not a legal ground which can be taken at any stage by the assessee. During the course of appeal also no such specific ground has been taken for providing telescoping. We find no force in the contention of the Ld. Counsel for the assessee and are inclined to confirm the view taken by Ld. CIT(A). Accordingly addition of ₹ 2,00,000/- for on money payments stands confirmed. Addition for silver article weighing 2.936 Kg found from the residence,1.270 kg found from locker and weighing 2.065 kgs found from another locker - HELD THAT:- In the instant case the quantity of silver articles is 6.271 Kg is likely on higher side. We therefore in the given facts and circumstances of the case and without setting a precedence for other cases and being fair to both the parties and in the interest of justice direct the revenue authorities to allow claim of 3 kg of silver articles/silver utensils to be a reasonable quantity of silver and thus delete the addition for 3 kg of silver articles.
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2019 (10) TMI 134
Disallowance of deduction u/s 35(2AB) - weighted deduction based on the Auditors Certificates and Tax Audit Report - AO after verifying Form Nos. 3CM and 3CL concerning the deduction claimed by the assessee u/s. 35(AB)that the eligible amount, as noted by the Department of Scientific and Industrial Research ( DSIR for short), in Form No. 3CL was less as compared to the deduction claimed by the assessee - HELD THAT:- The year under consideration is A.Y. 2009-10 and, for this year, the amendment was not applicable. Therefore, the assessee is right in contending that the non approval of the expenditure claimed by CSIR did not entitle the A.O. to make the disallowance and the ld. CIT(A) to confirm the same. This does also take care of a without prejudice contentions raised by the assessee, to the fact that deduction of actual expenditure be allowed to the assessee under the provisions of section 35(1)(i) and 35(1)(iv). These provisions of allowing 100% deduction of expenditure on in-house scientific research, irrespective of the approval of the unit and the certification of the expenditure, where the actual expenditure, as in the case of the assessee is verified by the Statutory Auditor and certified by the Independent Auditor and Tax Auditor. The assessee is found correct in contending that the ld. CIT(A) has observed that the extent of the expenditure was never verified by the A.O. Thus, according to the assessee it goes to confirms that the A.O. disallowed the claim without due application of mind. This contention of the assessee is correct, as evident from the assessment order itself, wherein the ground for the disallowance was the non approval of the expenditure claimed by the DSIR. On behalf of the assessee, another contention has been raised, that the ld. CIT(A) is wrong in observing that during the remand proceedings, the assessee has not objected to the action of the A.O. in making the disallowance u/s. 35(2AB). This, it has been emphasized, that the assessee had always objected to the disallowance before the A.O. as well as the ld. CIT(A). The attention in this regard has been drawn to the grounds taken by the assessee and the submissions raised by the assessee before the ld. CIT(A). It has further been submitted that in the remand proceedings, qua this issue, no enquiry whatsoever had been made by the A.O., notwithstanding the fact that the remand proceedings were proceedings where the assessee was required to press his claim afresh, which could have only be done by way of objecting to the action of the A.O. Finding merit in ground no. 1 raised by the assessee, the same is hereby accepted to the reversing order passed by the ld. CIT(A) on this issue and deleting the disallowance made u/s. 35(2AB). Deprecation to the assessee on higher revised opening WDV of the building - HELD THAT:- Assessee was not in a position to claim higher depreciation in the return of income by adjusting the opening WDV. There is no provision in law pointed out to us for habiting the assessee from making the claim of such like the present one in the assessment proceedings. Rather, it stands well settled that the claims of depreciation need must be allowed by the A.O. irrespective of whether the assessee has himself made such claim or not. However, there is no dispute about the entitlement of the assessee to claim of the depreciation. The A.O. ought to have allowed the higher depreciation on the direction issued by the ld. CIT(A), which, unfortunately, has not come about. Accordingly, the A.O. is now directed to upwardly revise the opening WDV and to allow the higher deprecation to the assessee on the part of the building CG house, which part was utilized by the assessee for its business purpose Disallowance u/s. 14A read with Rule 8D(2)(ii) - HELD THAT:- The assertion of the assessee that except for earning the exempt income is, as a practice, directly credited electronically to the bank account of the company and the payment is made by the Managers of the Mutual Funds, who make the payment directly and manage the investments, has nowhere been rebutted by either of the authorities below or even before us. It has not been called any question that the activity of investment did not require any expenditure. A mere perusal of the assessment order makes it explicit that no finding at all had been recorded by the A.O. as to the incurrence of any expenditure by the assessee for earning exempt income. That being so, the assessee is correct in contending that no disallowance u/s. 14A was called for. It at all, the salary of ₹ 7,91,181/-, paid to the Treasury Manager, Shri Prashant Baliga could be considered for disallowance. This factual assertion of the assessee may be verified at the level of the A.O. and, thereafter, the disallowance may be computed, for which, the issue is remitted to the file of the A.O. Fresh claim of the assessee concerning the dividend income u/s.10(35) - HELD THAT:- Evidently, the claim made by the assessee cannot be shut out, in view of the Hon'ble Supreme Court decision in the case of Goetze (India) Ltd. v. CIT [ 2006 (3) TMI 75 - SUPREME COURT] , as considered by the Mumbai ITAT in the case of APL India(L) Ltd [ 2012 (7) TMI 492 - ITAT, MUMBAI] and also referred to in the decision of the ITAT Cochin in the case of Apollo Tyres [ 2013 (11) TMI 209 - ITAT COCHIN] holding that the appellate authorities are not debarred to entertain the fresh claim. No decision contrary to the said decisions, as referred to by the ld. CIT(A) amongst others. Therefore, it cannot be said that the ld. CIT(A) committed any error in entertaining the claim made by the assessee.
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2019 (10) TMI 133
TDS u/s 195 - fees for technical services - receipt of services outside India- Business connection - appellant as engaged in the business of manufacturing of CI Pipes, DI Pipes and fittings, Pig Iron Sponge Iron, Metallurgical Coke, Sintered Product, and Paint etc set up a new office, development of market and stocking area in Italy - as submitted assessee is setting up a new office and godown for the purpose of boosting its exports - Income accrued in India or arisen in India - HELD THAT:- In the case on hand we are of the considered opinion that the facts of the case leads us to a conclusion that the assessee gets benefits of the first explanation to Section 9(1)(vii)(b) of the Act as the technical services when not utilized for the business activities of production in India and it was for services which were utilized in the business carried out outside India. The income of Mr. Firpo has not accrued or rise in India for the reason that. The entire services were rendered outside India. No hesitation in holding that the services rendered by Mr. Firpo which were in Italy and not in India are not taxable in India under Income Tax Act, 1961 as the same has not accrued or arisen in India and hence, no tax need be deducted u/s 195 - Decided in favour of assessee.
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2019 (10) TMI 132
Validity of reassessment - enquiry conducted by the DDIT (Inv.)-2, Indore - HELD THAT:- From the report, it is found that there are high volume of cash transactions in cash credit account done in the account maintained by the assessee at Khargaon branch. It is further observed by the A.O. that in the statement partner of the assessee firm Shri Nilesh Gandhi stated that the cash was drawn for payment to farmers from whom cotton was to be purchased and when cotton was not available in the market or the payment could not be made to the farmers, the same withdrawn cash was deposited back in the bank account. As further observed that in few cases, assessee firm had neither made payment to farmers on the day of actual purchase of cotton, which is mandatory as per Krish Upaj Mandi Act nor made additional payment @ 1% per day of the agricultural produce payable to the seller between the period of purchase and actual payment. As further observed that Shri Nilesh Gandhi during the statement admitted that cash is paid to the farmers on the same day or within 3 to 4 days but within a maximum time limit of 15 days. He stated that no interest as such was paid to the farmers for delayed payment. A.O. observed that the total turnover reflected in the books of accounts during the year under consideration is ₹ 71,73,13,479/- and in the judgement of ITAT in the case of Shri Amar Agrawal [ 2013 (7) TMI 1139 - ITAT INDORE] , net profit was determined at 5% of total turnover. A.O. was of the view applying the same rate of net profit, excess income of ₹ 1,98,92,774/- has been escaped assessment. Now it is to be determined whether the assessment has been rightly reopened or not. There is no dispute with regard to the fact that there was no other material before the A.O. except the report of the DDIT (Inv.) and observation made therein. Another fact that compelled the A.O. was decision of this Tribunal rendered in the case of Amar Agrawal [ 2013 (7) TMI 1139 - ITAT INDORE] . CIT(A) has decided this issue in favour of the assessee by holding that the A.O. failed to bring any fresh evidence for information regarding escapement of income. We do not find any fault in this finding of the CIT(A) as admittedly, in original proceedings, the A.O. has examined this issue. Moreover, the reopening is after lapse of four years as law is now well settled whether assessment is reopened after a lapse of four years from the end of the relevant assessment year, this can only be done, if it is brought on record that there is failure on the part of the assessee to disclose fully and truly all material facts. There is nothing on record suggesting that the assessee failed to disclose fully and truly material facts. Therefore, we affirm the view of the CIT(A) on this issue. This ground of the revenue s appeal is dismissed.
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2019 (10) TMI 131
Levy of penalty u/s 271(1)(c) - defective notice - HELD THAT:- Notice issued u/s 274 r.w.s. 271(1)(c) of the Act dated 22.03.2016 is invalid, untenable and suffers from the infirmity of non application of mind by the Assessing Officer. We accordingly direct to delete the penalty of at ₹ 50,000/-, ₹ 2,10,000/- and,₹ 2,60,000/- for Assessment Years 2008-09, 2011-12 and 2013-14 respectively imposed u/s 271(1)(c) on this legal ground itself. We accordingly allow the additional ground raised by the assessee on the legality of the penalty proceedings initiated u/s 271(1)(c) of the Act. Since the issue of penalty u/s 271(1)(c) also has been dealt on the preliminary points other arguments of the assessee dealing with the merits of the levy of penalty are not been dealt with, as the same are rendered academic in nature and thus the appeal of the assessee for the Assessment Years 2008-09, 2011-12 2013-14 are partly allowed.
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2019 (10) TMI 130
Admissibility of Additional Evidences / Materials filed by the assessee during appellate proceedings before the Ld. CIT(A) - HELD THAT:- When an assessee fails to avail of reasonable opportunities provided by the Assessing Officer during assessment proceedings; the assessee must pass the test of Rule 46A of I.T Rules, 1962 before the CIT(A) admits or accepts Additional Evidences or Materials during appellate proceedings before CIT(A). The crucial issue in the appeal before us is the admissibility of Additional Evidences / Materials filed by the assessee during appellate proceedings before the Ld. CIT(A); and this issue cannot be decided by Assessing Officer, an authority below the CIT(A). When the issue of admissibility of Additional Evidences / Materials filed by the assessee during appellate proceedings before Ld. CIT(A) is crucial; it will be improper and inappropriate to remand the matter to the Assessing Officer. We hereby set aside the aforesaid impugned appellate order dated 29.06.2012 of Ld. CIT(A) and restore all disputed matters to the file of the CIT(A), with the direction to pass fresh order. If the Ld. CIT(A) decides to admit Additional Evidences, he should clearly state the specific clause(s) of Rule 46A(1) of I.T. Rules that would apply; while recording the reasons under Rule 46A(2) of I.T. Rules. Further, if the Ld. CIT(A) decides to admit Additional Evidences, reasonable opportunity prescribed under Rule 46A(3) of I.T. Rules must be provided by the CIT(A) to the AO. Even if Ld. CIT(A) accepts the Additional Evidences / Materials under Rule 46A(4) of I.T. Rules, even then reasonable opportunities must be provided by the CIT(A) to the Assessing Officer to examine such Additional Evidences / Materials and to produce any evidence or document in rebuttal of Additional Evidences / Materials submitted or produced by the Assessee before the Ld. CIT(A). By way of abundant caution, we expressly clarify that we have not expressed any opinion on merits of the various quantum additions made by the Assessing Officer in the Assessment Order [and deleted by the Ld. CIT(A) in aforesaid impugned appellate order dated 24.04.2015] which are under dispute in the present appeal.
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2019 (10) TMI 129
Reassessment of proceedings u/s 147 - notice u/s. 143(2) has duly been served, without confronting the assessee with the remand report and the evidence produced by the AO before the Ld. CIT(A) - HELD THAT:- It is an admitted fact that assessee filed reply in response to the notice under section 148 of the I.T. Act on 26.11.2013 and submitted before A.O. that original return filed before him may be treated as return filed in response to the notice under section 148. A.O. on the same day served notice under section 143(2) upon assessee-company whose signature tally on the said notice. Therefore, notice issued under section 143(2) is invalid and resultantly, the assessment is vitiated and is liable to be quashed. Accordingly, set aside the orders of the authorities below and quash the re-assessment proceedings in the matter. Resultantly, all additions stands deleted. - Decided in favour of assessee.
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2019 (10) TMI 128
Disallowance u/s.2(24)(x) r.w.s 36(1)(va) - late payment of employee s contribution to PF - HELD THAT:- the instant case, it is not in dispute that the contribution to EPF was deposited by the assessee before due date of filing the return of income u/s.139(1) of the Act. Although the CBDT Circular No.22/2015 dated 17.12.2015 provides that the deduction relating to employee s contribution to welfare fund are governed by section 36(1)(va) of the Act as relied by the ld D.R. As relied upon M/S. BHARAT HOTELS LTD. [ 2018 (9) TMI 798 - DELHI HIGH COURT] the issue is restored to the file of the Assessing Officer to examine the contributions made with reference to the dates when they were actually made and grant relief to such of claim which qualified for such relief in terms of prevailing provisions of the Act. We clearly obverse that the assessee would be entitled to deductions in terms of section 36(1)(va) of the Act. Accordingly, this ground is allowed for statistical purposes. Addition to the extent of 10% by the CIT(A) in respect of repairs and maintenance, travelling, conveyance and demonstration charges and carriage inward expenses - main reason of disallowance by the authorities below that no third party bills are available and all the vouchers are self made - HELD THAT:- A.R. could not furnish any external vouchers in support of the claim. On bare perusal of the assessment order, it was clearly discernible that the payments were made by other parties on behalf of the assessee and only credit notes are issued and, therefore, the genuineness of the expenses could not be verified and most of the vouchers are self made. However, the Assessing Officer has not pointed out any specific defects in the bills and vouchers. However, the CIT(A) after taking into consideration all these aspects and also considering that the disallowance is excessive, reduced to 10% of the total expenses claimed by the assessee. Therefore, the order of the CIT(A) in restricting the disallowance to 10% is fair and reasonable and need not be interfered with Addition under the head 'Electricity charges' - HELD THAT:- It is also not disputed that there is no agreement between the assessee and Protection Manufacturing Private Limited for sharing the electricity. During the assessment years under consideration, the auditor of the assessee has certified that there is no manufacturing activity undertaken by the assessee, however, the claim of electricity expenses seems to be excessive. Although the claim of the assessee that the same is business expenditure and fully verifiable duly supported by documents but neither before the authorities below nor before us, could furnish any positive material on record to substantiate the claim. In view of above, we find no infirmity in the orders of lower authorities to interfere. Hence, this ground of appeal is dismissed.
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2019 (10) TMI 127
Reopening of assessment - Bogus purchases - AO got information from Sales Tax Department that the concerned assessees received fake purchase bills from hawala dealers - HELD THAT:- AOs received information from the Sales Tax Department about the details of accommodation entry providers and the assesses had also recorded purchases from such hawala entry providers. There was a close nexus between the report of the Sales tax Department and the formation of belief by the Assessing Officer about the escapement of income of the assessee for the year(s) under consideration. Such information was specific, not general or vague. Thus, it is abundantly clear that receipt of such an information was sufficient enough for the Assessing Officer to initiate the reassessment. In our considered opinion, no exception can be taken to the view canvassed by the AO(s) in initiating the reassessment on this score. The ground(s) taken by the assessee in challenging the initiation of reassessment proceedings in general way are thus dismissed. Bogus purchase bills received by the assessee(s) as accommodation entries from hawala dealers. It is seen that the issue of bogus purchases has recently come up for consideration before the Hon ble Bombay High Court in Pr.CIT Vs. Mohommad Haji Adam Co [ 2019 (2) TMI 1632 - BOMBAY HIGH COURT] and others, the Hon ble jurisdictional High Court has held that no ad hoc addition for bogus purchases should be made. It laid down that the addition should be made to the extent of difference between the gross profit rate on genuine purchases and gross profit rate on hawala purchases. Such case specific details are not readily available with the respective ld. ARs or the ld. DRs for facilitating the calculation of gross profit rates of genuine and hawala purchases. Under these circumstances, we set-aside the impugned orders and remit the matter to the file of the respective AOs for reconsideration. Going by the ratio laid down in the case of M/s. Chhabi Electricals Pvt. Ltd. and others [ 2017 (6) TMI 514 - ITAT PUNE] which both the sides agree to be applied for the instant case, we hold that the addition should be sustained on the amount of hawala purchases @10% plus the normal GP rate shown by the assessee for the year under consideration. We, therefore, set aside the impugned order and remit the matter to the file of AO for recomputing the amount of addition accordingly.
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2019 (10) TMI 126
Disallowance u/s.14A r.w. rule 8D - Whether in a mixed system of accounting the identification of money employed towards exempted and non-exempted income cannot be made? - CIT (A) deleted the interest expenses by observing that the own fund of the assessee exceeds the investment but confirmed the addition of the administrative expenses calculated in the manner as provided under rule 8D of Income Tax Rule against the exempted /dividend income - HELD THAT:- There is no ambiguity that the own fund of the assessee exceeds the amount of investment. Therefore, we are of the view that there cannot be any disallowance on account of interest expenses under section 14A read with rule 8D of Income Tax Rule. See RELIANCE UTILITIES POWER LTD. [ 2009 (1) TMI 4 - BOMBAY HIGH COURT] - we hold that no disallowance of interest expense claimed by the assessee can be made on account of investments Administrative expenses disallowance - ITAT in the own case of the assessee has directed to restrict the disallowance to the tune of ₹20,000 only. Thus we restrict the disallowance of the administrative expenses to the extent of ₹ 20000.00 only. Hence the ground of appeal of the Revenue is dismissed and the ground of appeal of the assessee is partly allowed. TDS u/s 194H - addition u/s 40(a)(ia) - HELD THAT:- Identical issue pertaining to the assessment year 2011-12 decided issue in favour of the assessee Addition u/s 14A read with rule 8D as per clause(f) of explanation 1 to section 115JB - HELD THAT: Disallowances made under the provisions of Sec. 14A r.w.r. 8D of the IT Rules, cannot be applied to the provision of Sec. 115JB of the Act as per the direction of the Hon'ble Calcutta High Court in the case of CIT Vs. Jayshree Tea Industries Ltd. [ 2014 (11) TMI 1169 - CALCUTTA HIGH COURT] Determine the disallowance as per the clause (f) to Explanation-1 of Sec. 115JB - we note that there is no mechanism provided under the clause (f) to Explanation-1 of Sec. 115JB of the Act to make the disallowance independently. Therefore our action for restoring back the issue to the file of AO would unnecessarily cause further litigation. Thus we limit the disallowance on an ad-hoc basis @ 1 % of the exempted income as per the clause (f) to Explanation-1 of Sec. 115JB Addition on notional interest on account of investment made in the subsidiary companies - HELD THAT:- As decided in own case for assessment year 2007-08 investment made by the assessee company for purchase of shares in the subsidiary company was not a legitimate business activity, was in fact, an expansion beyond what the Assessing Officer had himself envisaged. It was not even the case of the Revenue that investment made by the assessee in subsidiary company was for some illegitimate purpose or a mere device to divert its tax bearing income. Treating the interest as capital in nature - whether there was any extension in the existing business of the assessee on account of the purchase of the machineries? - HELD THAT:- The proviso to sec. 36(1)(iii) specifically deals with two situations, firstly, there should be acquisition of an asset and secondly such acquisition is for extension of existing business. Admittedly, in the instant case interest expenditure has been incurred for the acquisition of the machines out of the borrowed funds. As per the ld. CIT-A, the borrowed fund was used for the extension of the existing business as well as for establishing the new business being electricity generation unit. However, we note that there is no such breakup available in the order of the authorities below regarding the acquisition of machineries for the existing business and electricity generation unit. Similarly, the authorities below have not brought anything on record suggesting there was expansion in the production capacity or in the sphere of market area. Thus merely acquisition of the machinery does not ipso facto refer to the extension of the business. There is new activity of electricity generation unit and there was no interlacing of the fund utilized in the acquisition of machineries.Therefore, taking all facts and circumstances into consideration, we are of the opinion that the issue needs to be re-examined by the AO
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2019 (10) TMI 125
Unexplained cash credit u/s 68 - CIT(A) has relied on statements of few persons, claimed to be directors of the share applicant companies, recorded during the course of search proceedings by the Investigation Wing of the Income Tax Department on parties other than the assessee who stated that the share application money invested by their companies into the assessee company was in the nature of the accommodation entry - HELD THAT:- No other incriminating documentary evidence related to the assessee found during the course of the searches, has been referred either by the Assessing Officer or by the Ld. CIT(A). Thus, no corroborating material was found in the course of the searches to support statements of persons of the share applicant companies. It is also not in dispute that the assessee sought cross-examination of those persons and the lower authorities have failed to provide any such opportunity to the assessee. Further, we also find that directors of very same share applicant companies filed confirmations of having invested share application money and also appeared before the AO in remand proceedings (part of first appellate proceedings) along with all documentary evidences which includes, confirmation of share application money invested; bank statement of their company; balance sheet of their company; copy of Board Resolution of their company etc. The directors of the share applicant companies have not confirmed providing of any accommodation entry to the assessee. Thus, the oral statement given by the persons before the Investigation Wing, which have been relied upon by the learned CIT(A), is of no relevance, when directors of the share applicant companies have confirmed the investment in assessee company. The lower authorities have also failed to corroborate the statement of those persons that cash was deposited in their bank accounts and, thereafter, cheques have been issued to the assessee. The Assessing Officer has failed to substantiate this claim of cash deposit in the bank account of those persons or share applicant companies. CIT(A) is not justified in relying the statements of those persons given before the Investigation Wing, and that too without any cross-examination and corroborating material on record. CIT(A) has relied on statement of Sh. Amit Gupta, recorded during the course of survey proceedings under section 133A of the Act at the premises of the assessee. Sh. Amit Gupta stated that the company obtained share application money through accommodation entry but, later on, he retracted from his statement. No material corroborating the statement was found in survey proceeding from the premises of the assessee. Further, the assessee has submitted that Sh. Amit Gupta was not director in the assessee company at the time of receipt of share application money and, therefore, his statement is irrelevant. The Revenue before us could not establish, that Sh. Amit Gupta was director at the time of receipt of the share application money. In the case of S. Khader Khan Son [ 2013 (6) TMI 305 - SC ORDER] has held that statement under section 133A of the Act cannot be admitted as evidence unless corroborated by other documentary evidences. The assessee has succeeded in substantiating its claim as directed by the Tribunal in first round of proceedings. It is also evident that the Assessing Officer or the Ld. CIT(A) could not establish that the money deposited in the bank accounts of the share applicant money was in any manner rooted from the coffers of the assessee company. Case of LAKSHMI FLOAT GLASS LTD. [ 2016 (8) TMI 1463 - DELHI HIGH COURT] followed - Decided in favour of assessee.
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2019 (10) TMI 124
Disallowance of interest on disputed Govt. duty (Electricity Duty and water charges - HELD THAT:- As decided in own case [ 2018 (6) TMI 1662 - ITAT CUTTACK] we direct the AO to allow assessee s claim of interest insofar as assessee is also offering interest on the amount deposited in the bank account. When interest on such deposit is brought to tax, there is no reason for disallowing interest payable to Government for non-payment of such duty in Government account. The reasoning given by the AO for disallowing interest on non/delayed payment of water charges are that it was a contingent liability. We found that Tribunal in assessee s own case in earlier years had allowed this claim under similar circumstances and held that interest on unpaid electricity duty and water charges is fully allowable u/s.37 of the Act and provisions of Section 44A of the Act for disallowance is not attracted. It is pertinent to mention here that the ITAT Cuttack Bench in the case of NALCO in the combined order has held that interest on disputed Electricity Duty are allowable u/s.37 of the Act and further the interest on Electricity Duty, even if a statutory liability, the same do not fall under the ambit of Section 43B of the Act and therefore, even if such interest is not paid the same is not to be disallowed under section 43B. Following the reasoning given hereinabove with regard to the interest on delayed payment of electricity bill, we direct the AO to allow interest on the water bill. Disallowance of provision for leave encashment u/s.43B - HELD THAT:- As decided in own case [ 2018 (6) TMI 1662 - ITAT CUTTACK] wherein the Tribunal has restored the issue to the file of AO to examine and allow the claim of the assessee. Disallowance u/s.14A r.w.Rule 8D - HELD THAT:- Assessing Officer has considered average total investment appearing on the first day and last day of the financial year, which in our opinion is not justified. These investments may also include such investments from which no exempt income would have been earned by the assessee. As is clear from the Rule itself, the average of only such investments have to be taken into account, which yielded the income not forming part of the total income. AO was required to work out the average of such investment, the income from which did not form part of the total income instead of total value of investment. For this view, our stand is fortified by the decision of ACIT vs. Vireet Investment (P) Ltd., [ 2017 (6) TMI 1124 - ITAT DELHI] . None of the parties before us, however, have laid any details to examine as to which of the investments have yielded such income which did not form part of the total income. We, therefore, restore the matter back to the file of the Assessing Officer for calculating the disallowance u/s. 14A read with Rule 8D afresh, in the light of observations made in the body of this order above. Accordingly, ground No.4 is allowed for statistical purposes. Treatment of Short Term Capital Gains - not accepting Loss under Long Term Capital Gains and treating the same as Business income - HELD THAT:- As decided in own case [ 2018 (6) TMI 1662 - ITAT CUTTACK] we direct the AO to accept the loss under long term capital gains and treat the income under the capital gains instead of business income. Additional Depreciation u/s.32(i)(iia) - AO disallowed the same on account of the fact that the assessee could not produce the particulars/details of actual cost during the course of assessment proceedings - HELD THAT:- CIT(A) has already remitted the issue to the file of AO to allow the claim of the assessee after verification of necessary details. Therefore, any order/direction by us, at this stage, on this issue, would be futile exercise. However, a reasonable order is expected from the AO on the above observations of CIT(A). Disallowance of the loss claimed on account of re-valuation of non-moving stores and spares - HELD THAT:- As decided in own case [ 2018 (6) TMI 1662 - ITAT CUTTACK] in favour of the assessee and against the Revenue relying on the decision of the Tribunal in assessee s own case for the earlier assessment years. We follow the same reasoning given in the aforesaid appeal and we do not see any reason to interfere with the order of the CIT(A), who has passed a reasoned.
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2019 (10) TMI 123
Deduction u/s 11 - principle of mutuality - income of the assessee is received from members as well as non members - assessee being a trade association of software industries - HELD THAT:- It is not in dispute that the income of the assessee is received from members as well as non members. The income from the non members has been offered to tax by the assessee whereas membership fee from its own members is claimed as exempt on the principle of mutuality. Ld. CIT(A) held that the assessee being a trade association of software industries, it s main object being to promote and protect the interest of its members, membership received from its own members comes within the principle of mutuality. To this extent, it does not admit any doubt and the catena of decisions relied upon by the assessee hold so. Once the assessee is governed by the principle of mutuality, even if there are difference class of members, some of whom are not entitled to vote, the club would not be cease to be governed by principle of mutuality. In this case, as already stated, the assessee had offered to tax the income derived from the receipts from the non members. In so far as the members are concerned, there is no dispute as to the identity between the contributors and the participators. Case law relied upon by the ld. AR supports the view taken by the ld. CIT(A) on the aspect of principle of mutuality and the entitlement of the assessee to claim the benefit of Section 11 of the Act. We, therefore, uphold the same and find the grounds of appeal as devoid of merits. - Decided against revenue
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2019 (10) TMI 122
TP Adjustment - AMP expenses - International transaction - HELD THAT:- The terms of the distribution agreement had not changed/modified. Also, we find that a similarly placed distribution Agreement was relied upon by the Tribunal while disposing off the appeal of the assessee for A.Y. 2008-09. A perusal of the order of the Tribunal in the assesses own case for A.Y. 2010-11, viz. India Medtronic Vs. DCIT-10(1)(1), Mumbai [ 2019 (7) TMI 1516 - ITAT MUMBAI] reveals that the Tribunal had observed viz. (i) that, in the agreements between the assessee and its AE there was no condition of sharing of AMP; (ii) that, the agreements only referred to using best efforts to distribute the products or promote products in a commercially reasonable manner; and (iii) that, the terms of the agreement did not provide that the assessee had to share AMP expenses; (iv) that, even if the AE was benefitted indirectly by the AMP expenditure incurred by the assessee, it could not be inferred that it had entered into an agreement for sharing AMP expenses; and (v) that, the Bright Line Test should not have been applied by the TPO. We find that the Tribunal after relying on its earlier order in the case of Thomas Cook India Ltd. [ 2016 (7) TMI 318 - ITAT MUMBAI] , had therein decided the issue in favour of the assessee Adjustment in respect of such reimbursement of expenses - admission of admission evidence - HELD THAT:- Neither of the lower authorities had at any stage directed the assessee to place on record the complete supporting documentary evidence as regards the reimbursement of expenses therefore, there is a justifiable reason for the assessee for not submitting the supporting documentary evidence in respect of the balance reimbursement of expenses before them. Accordingly, in our considered view the additional evidence i.e the copies of invoices along with backup documents supporting reimbursement of expenses that has been filed by the assessee before us, merits admission on our part. However, we also cannot remain oblivious of the fact that as the said additional evidence which as claimed by the assessee substantiates the cost to cost nature of reimbursement of expenses to its AEs cannot be summarily accepted on the very face of it, and having been filed for the very first time,would thus require verification on the part of the revenue authorities. Matter restored. Transfer pricing adjustment on account of import of finished goods by the assessee company from its AEs - HELD THAT:- As the assessee has assailed the TP adjustment in respect of the aforesaid import transactions on multiple grounds, therefore, we shall advert to and adjudicate the same in a chronological manner. TPO has erred in not following the binding directions of the DRP that as the import of finished goods was a secondary adjustment, therefore, the same would be subsumed in the primary adjustment made on account of AMP, and hence, no separate addition to the total income of the assessee would be called for - We have given a thoughtful consideration and are of the considered view that as the adjustment of AMP expenses had been vacated by us, therefore, the said claim of the assessee is rendered as academic in nature and would not survive any more. Accordingly, the aforesaid claim of the assessee is rejected Claim of the assessee that the TPO/DRP had erred in rejecting the use of multiple year data by the assessee for computing the ALP of its transactions of import of goods from the AEs - As is discernible from the records, the assessee in the case before us had failed to establish as to how the financial data for the earlier two years of its comparables, which had been used by it for carrying out the transfer pricing analysis had in any way influenced the determination of the transfer prices in relation to the transactions of import of goods by the assessee from its AEs during the year under consideration. Our aforesaid observations are fortified by the judgment of PTC Software (I) Pvt. Ltd., . [ 2016 (9) TMI 1282 - BOMBAY HIGH COURT] . Accordingly, finding no infirmity in the order of the DRP which had rightly concurred with the TPO as regards rejection of the multiple year data used by the assessee for computing the ALP of its transactions of import of goods from the AEs, we uphold the same. Foreign exchange gain was not to be allowed as a part of the operating income for the purpose of computing the margin of the assessee and its comparables - TPO/DRP had erred in concluding that the foreign exchange gain was to be treated as non-operating in nature while computing the margins of the assessee for the year under consideration. Accordingly, the TPO is directed to consider the foreign exchangegain/loss as operating in nature while computing the margin of the assessee for the year under consideration. Selection of comparable - we find no infirmity in the view therein taken and accordingly uphold the same. As regards the claim of the assessee that the TPO/DRP had erred in adopting the annual report of Confident Sales India Pvt. Ltd. for financial year 2014-15, for determining the PLI of the said comparable for the year under consideration i.e financial year 2013- 14, we are unable to accept the claim of the assessee that the lower authorities had erred in adopting the said approach. As observed by the lower authorities, as sufficient data for financial year 2013-14 was available in the annual report of the assessee for financial year 2014- 15, therefore, in our considered view the said company on account of of availability of the relevant data was rightly selected as a comparable by the TPO/DRP. We thus in terms of our aforesaid observations uphold the view taken by the DRP as regards the inclusion/exclusion of the aforementioned two companies from the final list of comparables of the purpose of computing the ALP of the international transactions of import of goods by the assessee during the year under consideration Working capital adjustment - As is discernible from a perusal of the Form 3CEB and the records available before us, the assessee had worked out the adjustment resulting from the different levels of working capital i.e accounts receivable, inventory and accounts payable between the assessee i.e the tested party and the comparable companies. Also, the assessee had in the course of the proceedings before the lower authorities submitted that as working capital yields a return resulting from viz. (i). higher sales price; or (ii). lower cost of goods sold, therefore, the same would have an impact on the operational result. Accordingly, we are unable to accept the observation of the TPO/DRP that the assessee had failed to make out a case as to how the working capital adjustment would affect the net profit margin in the open market. Apart there from, the assessee has also assailed the correctness of the observation of the DRP that ther was a cessation of the agency business of the assessee in December, 2012. We thus are of the considered view that the matter in all fairness requires to be revisited by the DRP for afresh adjudication on the issue pertaining to working capital adjustment in the hands of the assessee. Not allowing the benefit of variation of +/- 3% n determining of the ALP - As per the second proviso to Sec 92C(2) of the Act, if the variation between the ALP so determined and the price at which the international transaction has actually been undertaken does not exceed +/- 3% of the price of such international transaction, then the price at which the international transaction has actually been undertaken shall be deemed to be arm s length price. Accordingly, we direct the TPO that if the ALP of the transactions of import of goods by the assessee from its AEs as determined by him in the course of the set aside proceedings does not exceed +/- 3% of the price of such international transactions, then the same shall be deemed to be at arms length. Disallowing depreciation on building - part of sale/distribution of the asset from block of asset - HELD THAT:- Admittedly, the concept of block of assets was made available on the statute w.e.f 01.04.1988. As such, once the asset entered into the block of asset and the same was accepted by the A.O, thereafter, in the subsequent years the claim of consequential depreciation on the said block of asset could not be disturbed, despite the fact that some of the assets forming part of such block of asset were no more used for the purpose of business. See M/S. SONIC BIOCHEM EXTRACTIONS PVT. LTD. [ 2015 (12) TMI 112 - BOMBAY HIGH COURT] - Depreciation would be allowable even in case of sale/distribution of the asset, as long as the block of asset remains in existence. In sum and substance, it was observed by the Hon ble High Court that the test of user has to be applied on the block of assets as a whole and not on the individual assets. Payment of convention expenses - expenses incurred by the assessee in the normal course of its business for creating a market for its products across the country - HELD THAT:- In the absence of any sanction or authority of law on the basis of which it could safely be concluded that the expenditure incurred by the assessee company on sales promotion expenses by way of distribution of articles to the stockists, distributors, dealers, customers and doctors, is in the nature of an expenditure which had been incurred for any purpose which is either an offence or prohibited by law, thus conclude that the same would not be hit by the Explanation to Sec. 37(1) Non granting consequential depreciation on non-compete fee which was held by the Tribunal as a capital expenditure - HELD THAT:- As relying on assessee's own case we herein direct the AO to allow the consequential depreciation on the non-compete fees to the assessee company. Levy of interest under Sec. 234B - HELD THAT:- The levy of interest under Sec. 234B is mandatory in nature. Our aforesaid view is fortified by the judgment of the Hon ble Supreme Court in the case of CIT Vs. Anjum M.H. Ghasawala [ 2001 (10) TMI 4 - SUPREME COURT] . However, as the aforesaid levy of interest under Sec.234B would be consequential to the adjudication of the merits of the issue under consideration, therefore, the A.O is directed to work out the same on the basis of the tax liability worked out in the hands of the assessee.
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2019 (10) TMI 121
Permanent Establishment, independent agent and business connection in India - fixed place of business maintained in India - Assessee is tax resident of Germany and India had entered in tax treaty with Germany - Indo-Germany DTAA - Whether the non-resident has business connection in India from or through which income profit or gain can be said to be accrue or arise to them within the meaning of section 9 or Article 5 of India Germany tax treaty? - HELD THAT:- There is no dispute that the activities of manufacturing of Car is completed by assessee (Audi AG) outside India and constitute a separate and independent activity. The assessee claimed that Cars are sold to Volkswagen Group Sales for further sales in India and Volkswagon Group sales is not acting on behalf of Audi AG nor Audi AG is selling Car through Volkswagon Group Sales. The assessee also claimed that Cars are sold to Volkswagon Group Sales principle to principle basis and thereafter, Volkswagon Group Sales it on a principle to principle basis to the dealers. The sales of goods/Car are completed outside India than income arising from sales by no stretch of imagination can be said to be taxed in India. The assessing officer has not brought any material to counter the stand of the assessee that Cars are not sold to Volkswagon Group Sales on principle to principle basis and thereafter, Volkswagon Group Sales it on a principle to principle basis to the dealers. As in case of Daimler AG [ 2012 (6) TMI 479 - ITAT MUMBAI] despite the fact that the AE was performing more activities as narrated in the chart above, it was held that the associated entity not created either fixed place PE nor dependent agent. Further, the income arising on the sales of Car by Volkswagen Group Sales to dealers in India is income accruing or arising in India and is taxed separately in the hands of Volkswagen Group Sales. In our view merely acting for non-resident principal would itself render an agent to be considered PE for the porpose of allocating profit. The assessee is not undertaking any definite activity to which profit can be attributed. We are of the V W Group sales is an independent and separate entity, which is engaged in selling of fully built up cars imported from the assessee, Volkswagen AG and Skoda India to dealers and distributors. Thus, VW Group cannot be regarded as a PE of assessee in India. Car is manufactured by the Audi AG outside India and constitutes a separate and independent activity. As noted earlier the car is sold to VW Group for further sale in India and VW Group sale is not acting on behalf of Audi AG nor is Audi AG selling cars through VW Group sales. Moreover, the cars are sold on principle to principal basis. Hence, we are of the view that Assessing Officer was not justified in invoking section 9 of the Act and the Article 5 of Indo-Germany Tax Treaty for taking view that assessee has PE in India. - Decided in favour of assessee. Levy of interest u/s 234B 234C - HELD THAT:- Considering the fact that the assessee is a foreign company and tax resident of Germany. The entire income of the Audi AG is subject to tax deducted at source under section 195 of the Act. The assessee has no liability to pay advance tax and the fact that we have already hold that income earned by assessee is not taxable in India, we direct the Assessing Officer to recompute the tax/interest by following the decision of the jurisdictional High Court in case of NGC Network Asia LLC [ 2009 (1) TMI 174 - BOMBAY HIGH COURT]
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2019 (10) TMI 120
Assessment u/s 153C read with Section 143(3) - Undisclosed receipts noted on seized documents found during the course of search and seizure action under section 132 - HELD THAT:- Recording of satisfaction by the AO of the person searched is a condition precedent for the AO of the 'other person' to acquire jurisdiction. Unless such jurisdictional condition is satisfied, there can be no question of making assessment or reassessment of the 'other person.' The satisfaction in this case is not recorded by the AO of the searched party, which is a pre-condition for invoking jurisdiction u/s 153C of the Act and hence, the assessment framed under section 153C read with Section 143(3) of the Act is bad in law and hence, quashed. - Decided in favour of assessee
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2019 (10) TMI 119
Deduction u/s 80IA - eligible profit computation - set-off of unabsorbed depreciation or loss of the years prior to initial assessment year - HELD THAT:- Board has recognized rights of the assessee for selecting the initial assessment year for claiming deduction under section 80IA. The Board has appraised its authorities and contemplated that sub-section (2) of section 80IA provide that the assessee who is eligible to claim deduction under section 80IA has option to choose the initial /first year from which it may desire the claim of deduction for ten consecutive years out of slab of 15 years as prescribed under that sub-section. It has also been propounded by the Board that once such initial assessment year has been opted by the assessee, he shall be entitled to claim deduction under section 80IA for ten consecutive years beginning from the year in respect of which he has exercised such option subject to fulfillment of conditions prescribed in the section. As far as conditions of section are concerned, the AO has himself allowed the deduction under section 80IA. Thus, he has himself has not disputed above fulfillment of necessary conditions for claiming the deduction under section 80IA. It is also pertinent to note that in the assessment years 2012-13 and 2013-14, the stand of the assessee that loss of earlier years i.e. prior to selection of initial assessment year are required to be ignored for the purpose of section 80IA. CIT(A) correctly has accepted the claim of the assessee and held that unabsorbed depreciation or loss of the years prior to initial assessment year are not required to be set off against the eligible profits and thus the assessee is entitled for deduction under section 80IA on the enhanced amount. Addition u/s 40(a)(i) of the Act on account of non-deduction of TDS on the foreign commission payment - HELD THAT:- We are of the view that the ld.CIT(A) has examined issue with all possible angle in order to find out whether commission paid by the assessee is genuine or alleged commission has element of income taxable in India. After satisfying himself on both the counts, the ld.CIT(A) has allowed deduction of the above expenditure to the assessee in both these assessment years. On due consideration of the detailed finding, we do not find any merit in the grounds of appeal raised by the Revenue. Disallowances u/s 80IC - Whether alleged income sub-divided by the AO has nexus with the manufacturing activity or not? - HELD THAT:- There is no dispute with regard to the proposition that deduction under section 80IC is admissible where the gross total income of an assessee includes any profit and gains derived by an undertaking or an enterprise from any business referred to in sub-section (2) of section 80IC of the Act; sub-section (2) further contemplates that this section applies to an undertaking or enterprise which has begun or begins to manufacture or produce any article or things. There is no dispute that the assessee has begun to manufacture any article or thing. The question whether the alleged income sub-divided by the AO has nexus with the manufacturing activity or not. As far as interest income on fixed deposits made with electricity department is concerned, it has direct nexus with the manufacturing activity. Unless an electricity connection is there, no manufacturing activity would commence and for taking electricity connection, it is mandatory to give deposits. Similarly, the assessee had made recoveries from transporters on account of loss of material on transit. Therefore, it has a direct nexus with the manufacturing process. The goods manufactured or raw-materials purchased by it were lost in transit, which were compensated by the transporter. It has a direct nexus. Similarly, if the assessee get certain discount from the supplier, then it would reduce the purchase price of the material, which will enhance the profit, and therefore, deduction on such higher profit will be admissible. The ld.CIT(A) has rightly appreciated this aspect and granted the deduction to the assessee. We do not find any error in the order of the ld.CIT(A), and therefore, this ground of appeal is rejected in both the years. Disallowance u/s 36(1)(va) - delay in deposit PF dues in the PF account - HELD THAT:- Assessee did not pay salary to its employees, then would it get an enhanced period of limitation for depositing the PF dues in the PF account ? If that be accepted, then there will be no relevancy of due date provided under the respective Acts. For this proposition we find support from the subsequent decision of Hon ble jurisdictional High Court in the case of M/s.Checkmate Facility And Electronics Solutions P.Ltd. Vs.DCIT, [ 2018 (10) TMI 994 - GUJARAT HIGH COURT] on this similar issue. Therefore, we do not find any merit in this ground of CO. It is dismissed.
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2019 (10) TMI 118
Revision u/s 263 - Unexplained cash credits - HELD THAT:- CIT has held in very clear terms that the Assessing Officer had nowhere examined identity, genuineness and creditworthiness of the assessee s share application / premium neither in sec. 143(3) nor in re-assessment proceedings. We notice in this backdrop that the tribunal s co-ordinate bench s decision in Rajmindir Estate Pvt. Ltd. [ 2016 (5) TMI 801 - CALCUTTA HIGH COURT] has decided the very issue in Revenue s favour as held Money allegedly received on account of share application can be roped in under Section 68 of the Income Tax Act if the source of the receipt is not satisfactorily established by the assessee. Mere fact that the payment was received by cheque or that the applicants were companies, borne on the file of Registrar of Companies were held to be neutral facts and did not prove that the transaction was genuine We therefore adopt the above extracted detailed discussion mutatis mutandis to affirm the CIT s action to a Assessing Officer treating the assessee s share application / premium as unexplained cash credits. - Decided against assessee Penalty u/s 271(1)(c ) - CIT s action holding it to have concealed the particulars of income of its unexplained cash credits in the nature of share application / premium - HELD THAT:- The assessee did not appear in the lower proceedings as per para-3 of the CIT s order. Nor there is any discussion in the impugned penalty order as to whether it had filed any representation against the proposed penal action. We thus conclude that the CIT s has rightly imposed the impugned penalty forming subject-matter of the instant. - Decided against assessee
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2019 (10) TMI 117
Revision u/s 263 - unaccounted cash - Surveillance team found cash in possession of assessee - HELD THAT:- In this case, during the course of vehicle surveillance by the flying squad set up for election purpose in Madurai Central Assembly Constituency, a sum of ₹ 18.10 lakhs was found on 19/08/2016 in the possession of the assessee and Sri Tharagala Lakshmana Rao. When they have been asked for the source, it was submitted by the assessee that ₹ 10.10 lakhs belonging to him and the remaining balance of ₹ 8.00 belongs to Sri Tharagala Lakshmana Rao. The Surveillance team not satisfied with the explanation given by the assessee and the amounts seized from both the parties and handed over to the District Treasury, Madhurai. Subsequently, the ADIT (Inv.), Unit I II has transferred the case to the DGIT (Inv.), AP Telangana, who made enquiries in this case and reported that sources have been verified and found to be correct and seizure of cash is not warranted. Subsequently, case was transferred to the Assessing Officer for taking necessary action. AO selected this case manually for scrutiny after obtaining permission from the Pr.CIT. The Assessing Officer made detailed enquiries and called the assessee to explain the source and after considering the explanation, he made the addition of ₹ 7.00 lakhs and the same is brought to tax in the hands of the assessee. Therefore, in our opinion, the order passed by the AO neither erroneous nor prejudicial to the interest of the Revenue. It is further noted that as per the order passed by the Pr.CIT, the order of the Assessing Officer is void ab initio and not maintainable. If the order of the Assessing Officer is prima facie invalid, the Pr.CIT cannot exercise the powers conferred in u/sec. 263, therefore on this count also, the order passed by the Pr.CIT is not valid - Decided in favour of assessee.
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2019 (10) TMI 116
Taxability of professional goodwill - whether additional payment on account of self generated goodwill, whether or not the compensation received is taxable under the head Profits and Gains from Business or Profession u/s 28, whether or not the right transferred is giving rise to capital gain in the hands of the appellant? - whether assessee was not managing the whole or substantially the whole of the affairs of the company? - HELD THAT:- We fail to see how it can be said that the affairs were fully or substantially managed by the assessee. It is a common knowledge that the affairs of a company are generally entrusted to directors and such directors generally act as per the authority given by the Board of Directors to them and it is also a common feature that the concerned director reports to the Board of Directors. In such a case, it is the Board of Directors collectively who can be said to be managing the business affairs of the company. Therefore, we conclude that the assessee was not managing the whole or substantially the whole of the affairs of the company and the impugned amount of ₹ 1.75 crore cannot be related to the three, rights referred to in the Addendum dated 20.08.2007. Second argument of the assessee that management right is a capital asset within the meaning of sec. 2(14) by virtue of retrospective amendment made by Finance Act, 2012 and so provisions relating to computation of capital gain will apply and not those relating to business income - It is true that under the scheme of taxation of capital gain, it is not the entire sale consideration of an asset which is chargeable to tax but it is the profit or gain arising on transfer thereof which is taxable. This observation is subject to the specific provisions of law which prescribe that in case of some category of capital assets, cost of acquisition is considered to be nil and, in those cases, full consideration accruing on transfer will become taxable. In the instant case, it is the stand of assessee that cost of acquisition of management right is indeterminate, no capital gain can be worked out and so the provisions are not workable. We observe that this plea was taken by the assessee before the AO himself, as is evident from para 4 of the assessment order and it has remained uncontroverted. Even before us, ld. DR has not made any submission on this aspect of the argument of assessee. As rightly pointed out by the assessee, sec. 55(2) does not specify that cost of acquisition of management right will be taken to be nil. In other words, there is no deemed cost of acquisition provided in the Statute. No case has been made out by the AO to show as to what was the cost of management right in the hands of assessee. Therefore, what has been brought to tax is the entire consideration for relinquishment of management right which runs contrary to the settled proposition of law, which was laid down by Hon'ble Supreme Court in the case of B. C. Srinivasa Setty [ 1981 (2) TMI 1 - SUPREME COURT] It is evident that the revenue has not established that the assessee was managing the whole or substantially the whole of the affairs of the company as no case has been made out by the Revenue that the amount of ₹ 1.75 crore received by the assessee from M/s CARE was on account of relinquishment of any managerial rights. Even if, assuming that the amount received by the assessee is relatable to relinquishment of any managerial right, in view of ratio laid down by Hon'ble Supreme Court in the case of B.C. Srinivasa Setty (supra) the cost of any such managerial right being indeterminate, provisions relating to computation of capital gain are not workable and consequently, it has to be held that the charge under sec. 45 never intended to levy a tax on such a transaction. We are of the considered opinion that the amount of ₹ 1.75 crore received by the assessee is neither chargeable under sec. 28(ii)(a) nor under the head capital gain. Accordingly, we uphold the order of ld. CIT (A) on this issue. Thus, all the grounds of Revenue are dismissed.
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Customs
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2019 (10) TMI 115
Maintainability of appeal - monetary amount involved in the appeal - HELD THAT:- In the present case, it is an admitted position that the tax effect involved in this case is less than the monetary limit prescribed for preferring departmental appeal before the High Court. However, the learned Senior Standing Counsel has submitted that this case falls within the exceptions contained in the instruction issued by the CBEC, namely that this is a case where a circular has been held to be illegal or ultra vires. The appeal is dismissed as not maintainable on the ground that the tax effect involved is less than the monetary limit prescribed by the CBEC for preferring departmental appeals before the High Court.
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2019 (10) TMI 114
Smuggling - release of seized goods with conveyance - Betel Nuts (Arecanuts) - goods in damaged condition - N/N. 09 /1996-Cus (NT) dated 22.01.1996 issued under Section 11 of the Customs Act read with Section 3(2) of the Foreign Trade (Development and Regulation) Act, 1992 - HELD THAT:- The issue in the present case is squarely covered by the decision in the case of M/S OM SAI TRADING COMPANY AND M/S MAA KAMAKHYA TRADERS, VERSUS THE UNION OF INDIA, THE COMMISSIONER OF CUSTOMS AND ORS. [ 2019 (9) TMI 1283 - PATNA HIGH COURT] where it was held that This Court is of the considered opinion that in the given facts and circumstances of the case, where the matter is still under investigation and even some accredited labs have come into existence, this Court need not interfere with the seizure of the Betel Nuts at this stage and this issue be kept open for consideration at appropriate stage after the investigation is over and the respondents receive a report as regards the country of origin from an accredited lab within a period of three months by following the established procedures. In the present case, the samples of Betel Nuts are in damaged condition with presence of insects. These are thus, unsafe for human consumption. Other unifications are still going on. The petitioner no. 1 is, thus, unable to make out a case for direction to release the Betel Nuts. Release of vehicle - HELD THAT:- It will be open for petitioner no. 2 to make an appropriate application before the competent authority who will consider the same and pass an appropriate order thereon within a period of 30 days from the date of filing of the application. Application disposed off.
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2019 (10) TMI 113
Misdeclaration and undervaluation of imported goods - consignments of Zinc Ash, Zinc dross, Zinc scrap and Aluminum scrap of different grades - Allowability of discount on LME Prices - denial of request for cross examination of chemical examiner - HELD THAT:- When the goods on importation were found to be zinc ash and permitted to be cleared after testing and also that the chemical examination report of goods seized from factory is inconclusive, the goods would merit classification as Zinc Ash only. Even though there is communication from the Indian Consulate or the emails between the indentor and supplier, but in the light of the fact that the goods were found to be Zinc Ash during imports, we are inclined to hold that the charges of mis-declaration are not sustainable and hence no duty demand can be made. There is no evidence found at the end of the Appellant and the documents relied upon to support the allegation were of third party. Hence in such circumstances, the charges of misdeclaration and undervaluation does not sustain. Allowability of discount on LME Prices - HELD THAT:- Applying the LME price minus discount band as per SMRI bulletin or DGIV Circular No. 14/2005 dt. 16.12.2005 is absolutely wrong. The Appellant has also relied upon the letter F. No. S/26 Misc-1040/2005 GrIV dt. 13.02.2006 of the Commissioner of Customs, Nhava Sheva wherein the Commissioner in reference to Valuation of Aluminium Scrap under Alert Circular No. 14/2005 issued under F. No. VAL/TECH/37/2005 dt. 16.12.2005 has stated that there is no linear correlation between the prices of Aluminium Metal and prices of Aluminium Scrap quoted in Metal Bulletin. It is also clear from the communication dated 29.10.2008 of the Institute of Scrap Re-cycling Industries, INC (ISRI) that the scrap price would depend on many factors and the LME based price cannot be applied blindly to imports of scrap for the purpose of valuation. The whole case is also based upon allegation that the differential amount was paid by the Appellant through Hawala Channels or transfer. However, in the show cause notice not a single person was identified or investigations were made as whom the differential value amount was handed over. Except naming Chaganlal no person has been named. There is no evidence as to how the Appellant came into possession of cash alleged to be differential amount towards scrap import neither there is any evidence of any cash being handed over to any person representing suppliers. In absence of same the allegation of undervaluation cannot be supported. The demands confirmed against M/s SMRI, confiscation of goods and penalties imposed upon M/s SMRI is not sustainable - For the same reason the penalty imposed upon co-appellants namely Shri Sushil Kumar Agarwal, Shri Surendra P. Kachhara and Shri Sanjeev Kumar Agarwal is also not sustainable - Appeal allowed - decided in favor of appellant.
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Securities / SEBI
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2019 (10) TMI 112
Related party transactions - Sale of assets of the Company - additional transactions without PB Notice - as submitted Company had sought shareholders approval through special resolution inter alia regarding the sale of assets of the Company - As submitted that since Respondent no.17 JMF ARC has acquired 26% of the equity of Respondent no.2 Company against the provisions of the Takeover Regulations, 2011 it should have been prohibited by the Respondent no.1 SEBI from participating in the voting under the provisions of Regulation 32 of the Takeover Regulations - HELD THAT:- During the pendency of the appeal, in view of the directions of Respondent no.1 SEBI in the impugned order, Respondent Company had issued fresh PB Notice adding the explanatory note further explaining the additional transactions. We were told at the Bar that the process of voting is complete and the date of declaration of the result was scheduled as 18th September, 2019. Therefore, vide order dated 13th September, 2019 we directed Respondent no.2 Company not to declare the results of the postal ballot in question till we deliver the judgement. In view of the dismissal of Appeal no.357 of 2019 the interim order will have to be vacated. Hence the following order. In the result, Appeal filed by ITC Ltd. fails while Appeal filed by JMF ARC is allowed. The interim order dated is hereby vacated.
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2019 (10) TMI 111
Default of Service of notices and orders - non service of show cause notice personally - Unpublished price sensitive information used by MD to sale of shares - violation of the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as SEBI Act ) and the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992 (hereinafter referred to as PIT Regulations ) - HELD THAT:- In the instant case, we do not find anything on record to indicate that any effort was made by the respondent to serve the show cause notice personally. We do not find that any effort was made to serve at the place where he carried on business or had worked for gain. Thus, without complying with the procedure adopted under Clause (a) and (b) of Rule 7 the respondent cannot take direct steps for affixation under Clause (c). Further, we find that the show cause notice that was sent by speed post came back undelivered. No effort was made to find out as to whether the appellant was residing at that premises or not Mode of service prescribed under Rule 7 is not exhaustive and other modes of service was always available in addition to the modes of service prescribed under Rule 7 i.e. for example publication of the notice in an appropriate newspaper or service through email. In this regard, we find that SEBI was corresponding with the appellant through email and information was supplied by the appellant through email. This mode could have easily been adopted by the respondent which they failed to do so. Instead the Adjudicating Officer made efforts to get the show cause notice served through the broker of the appellant. It is strange that when the email id of the appellant was known to the respondent which is quoted in the impugned order, but made no effort to serve the show cause notice or the notice for date of hearing through email. In addition to the modes prescribed under the Rules of 1995, other modes could also be utilized such as O29R2 of CPC or under the Securities and Exchange Board of India (Manner of Service of Summons and Notices issued by the Board) (Amendment) Regulations, 2007 which has been issued in exercise of the powers conferred by Section 30 of the SEBI Act, 1992 which provides various modes for tendering notice to a person which also includes service by electronic mail service. Consequently, we are of the opinion that sufficient service was not made upon the appellant. Since the show cause notice was not served upon the appellant a vital right was denied to him to reply to the show cause notice and thereafter to defend himself. Such denial of right is violative of the principles of natural justice as embodied under Article 14 of the Constitution of India. The impugned order, being an ex-parte order, suffers from the vice of natural justice and cannot be sustained. The impugned order is accordingly quashed. The appeal is allowed
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2019 (10) TMI 110
Insider trading - violation Securities and Exchange Board of India - PFUTP Regulations as well as Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992 - HELD THAT:- The trading pattern of the parties except Mr. R. Venkatachalam would show that these parties entered into buy and sell order of the shares in miniscule proportion for a price much lower than LTP on the given date within seconds to three minutes. Further, within seconds or minutes their orders matched. Three other persons had transacted only on four occasions out of 18 transactions. Appellant Mrs. Rajasekharan Devaki is the wife of appellant Mr. Rajasekharan and are admittedly connected to Mr. Venkatachalam. Though appellant Mr. Srivatsan has no direct connection it is a fact that not only he knew some friends of Mr. Venkatachalam, the trading pattern as detailed supra would on preponderance of probabilities, show that there was meeting of minds between the parties. The impugned order of the Adjudicating Officer in this regard therefore cannot be faulted with. As regards the violation of the PIT Regulations it is an admitted fact that the said regulation has been violated though for small quantity of shares. The Adjudicating Officer has taken note of this and therefore the penalty of ₹ 3 lakhs on this count was imposed. Considering all these facts on record we do not find any reason to interfere in the impugned order.
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2019 (10) TMI 109
Insider trading based on the unpublished price sensitive information ( UPSI ) - Violation of provisions of the PIT Regulations, 1992 read with section 12A of the SEBI Act - As contended that the work orders which the company had procured was in the ordinary course of business and, in any case, when the shares were purchased, the company had not bagged the contract and was only found to be the lowest price bidder (L1) and that being the lowest price bidder did not mean that the contract was issued in favour of the company nor being (L1) could be considered as a price sensitive information - HELD THAT:- Having perused the letter dated September 15, 2010 given by SEBI and the reply dated September 24, 2010 given by the appellant we find that the information sought was the relationship of the appellant with the other entities. A perusal of the said letter would indicate that the information sought was as to what was the relationship of the appellant with other entities, namely, whether they were relatives or not. Information was supplied by the appellant in accordance with the provisions of the Companies Act, 1956. The letter of SEBI does not explicitly states that the appellant was required to furnish the information with regard to his professional or working relationship with the other entities. Even though the Appellant No. 1 may have professional or working relationship with the other entities, we are of the opinion that since there was no explicit clarity in the information sought the reply given by the appellant, being in accordance with the provisions of the Companies Act, 1956, was not misleading. SEBI ought to have been more professional and should have asked clear cut information which is explicit and is not vague. Consequently, we are of the opinion that the imposition of penalty in so far as providing misleading information cannot be sustained. Having perused the letter dated September 15, 2010 given by SEBI and the reply dated September 24, 2010 given by the appellant we find that the information sought was the relationship of the appellant with the other entities. A perusal of the said letter would indicate that the information sought was as to what was the relationship of the appellant with other entities, namely, whether they were relatives or not. Information was supplied by the appellant in accordance with the provisions of the Companies Act, 1956. The letter of SEBI does not explicitly states that the appellant was required to furnish the information with regard to his professional or working relationship with the other entities. Even though the Appellant No. 1 may have professional or working relationship with the other entities, we are of the opinion that since there was no explicit clarity in the information sought the reply given by the appellant, being in accordance with the provisions of the Companies Act, 1956, was not misleading. SEBI ought to have been more professional and should have asked clear cut information which is explicit and is not vague. Consequently, we are of the opinion that the imposition of penalty in so far as providing misleading information cannot be sustained. Admittedly, the appellants have been found to be connected persons under section 2(c) of the PIT Regulations and were also found to be deemed to be connected persons under section 2(h). The appellants were also found to be insiders under section 2(e) of the PIT Regulations and were found to have traded in the shares having knowledge of the price sensitive information. Consequently, all the appellants being connected persons have been held to be equally liable to pay the amount of penalty jointly and severally. We thus do not find any error in this regard. For the reasons stated aforesaid the appeal is partly allowed. The order of the AO imposing a penalty of ₹ 40,00,00,000/- (Rupees Forty Crore Only) under section 15G and section 15HA of the SEBI Act against the appellants for violation of Regulation 3 and 4 of the PIT Regulations read with section 12A(d) and (e) of the SEBI Act is affirmed. The imposition of penalty of ₹ 20 lakhs (Rupees Twenty Lakhs Only) under section 15A(a) of the SEBI Act for submitting misleading information to SEBI and penalty of ₹ 38 lakhs (Rupees Thirty Eight Lakhs Only) upon Appellant Nos. 1 and 2 for violation of Regulation 8A(1) and (2) of the Takeover Regulations, 1997 are quashed.
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Insolvency & Bankruptcy
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2019 (10) TMI 108
Maintainability of application - Initiation of CIRP - Corporate Debtor - failure in repayment of outstanding amount - Section 7 of the Insolvency and Bankruptcy Code, 2016 read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 - HELD THAT:- It is found that the amount of loan advanced to the corporate debtor company falls within the category of financial debts. Further the corporate debtor has committed default, which meets the requirement of Section 3(1) and (12) of the Code to initiate the CIRP in respect of the Corporate Debtor company. As the default of debts is established for a sum of ₹ 8,00,000/- + simple interest @ 9% per annum (as on 01.04.2018), the petition is found complete in terms of the provisions of the I B Code. Petition admitted - moratorium declared.
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2019 (10) TMI 107
Direction to RoC to accept the Form DIR-12 in relation to the appointment of the Directors of the Company, as Ms. Jayashree (one of the Directors) refused to file the required Form - HELD THAT:- In the case on hand, Ms. Jayashree one of the Directors has not filed the required Form before RoC concerned, thereby the newly appointed Directors name could not be reflected in the MCA portal. Besides this, the Company is undergoing the CIR Process and struggling for its revival. The assistance and co-operation of the Applicants/Directors is essentially required by the Resolution Professional and the Creditors to work out the Information Memorandum so that a viable Resolution Plan is received, the same may be placed before the CoC for taking appropriate decision. In case, the Directors appointed in the General Meeting are not allowed to be part of the CoC, it will certainly hamper the CIR Process and the very object of the CIR Process will get defeated. The Resolution Professional is directed to allow the Applicants viz., Mr. Kothanda Raman Sivakumar and Mr. Sathyamurthy Balaji Sreedhar to attend the meetings of the CoC, who shall provide every kind of information to the Resolution Professional including the books of account, financials and assets of the Corporate Debtor including receivables, so that the Resolution Professional could be in a position to work out the Information Memorandum and set up the criteria for EoI and proceed with the CIR Process as expeditiously as possible to seek Resolution Plan. Application allowed.
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2019 (10) TMI 106
Maintainability of application - initiation of CIRP - Corporate Debtor - debt due and payable or not - HELD THAT:- This adjudicating authority is of the considered view that operational debt is due to the Applicant and in support of that operational creditor has placed copy of chart giving details of salary outstanding. That, the respondent has acknowledged the debt in letter dated 01.01.2019 and has not raised any dispute. In the reply filed by the respondent, the receipt of notice has been acknowledged. Therefore, service is complete. That, Applicant is an Operational Creditor within the meaning of sub-section (5) of Section 20 of the Code. The petitioner is able to establish that there exists debt as well as occurrence of default - thus, the Application filed by the Applicant is complete in all respects. Application admitted - moratorium declared.
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2019 (10) TMI 105
Maintainability of application - initiation of CIRP - Corporate debtor - default in repayment of amount - HELD THAT:- The Petitioner failed to make out any case so as to interfere in the issue by invoking the provisions of the Code and thus it is liable to be dismissed. Petition dismissed.
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2019 (10) TMI 104
Time limitation - Maintainability of application - claim rejected on the ground that the claim relates to the sister concern PD Agro Processors Pvt. Ltd. - Jurisdiction of Appellate Tribunal to condone the delay - HELD THAT:- The appeal has been preferred after long delay and delay for condonation of application has been filed. Resolution Professional has rightly pointed out that beyond 45 days, the delay is 44 days, therefore, this Appellate Tribunal has no jurisdiction to condone the delay. Sub-section 2 of Section 61 provides for powers to this Tribunal of only 15 days which it can condone over the period of appeal of 30 days, if there was sufficient cause. For the said reason, this Appellate Tribunal has no jurisdiction to condone the delay beyond 15 days and thereby the appeal is barred by limitation. Appeal dismissed being barred by limitation.
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2019 (10) TMI 103
Maintainability of petition - Dissolution of the corporate person - Voluntary dissolution - compliance with the requirements of Section 59 of the Insolvency and Bankruptcy Code, 2016 or not - HELD THAT:- The Application is filed by the liquidator under section 59 of the IB Code, 2016. This Adjudicating Authority has to see whether the liquidator has complied with all the provisions of section 59 of the IB Code, 2016 read with Regulation 3 of the Regulations before initiating voluntary liquidation of the company - It is on record that the board of directors have passed necessary resolution on 16.02.2018 to liquidate the company voluntarily and all the directors have also executed the Declaration of Solvency dated 07.03.2018 by way of an affidavit in terms of provisions of section 59(3)(a) of the IB Code, 2016. Thus, the voluntary liquidator has complied with the requirement of the provisions of Section 59 of the IB Code, 2016 and filed this application under Section 59(7) of the IB Code, 2016 to dissolve the Corporate Person viz., Akana Software Engineering India Private Limited. Petition disposed off.
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2019 (10) TMI 102
Validity of Resolution Plan - initiation of CIRP - Corporate Debtor - Section 7 of I B Code, 2016 read with Rule 4 of the Insolvency Bankruptcy (Application to Adjudicating Authority) Rules, 2016 - HELD THAT:- The Resolution Plan approved by the CoCs with 96.45% voting share and placed before this Authority appears to be in line with the object and purport of I B Code, 2016, as it provides for insolvency resolution in a time bound manner for maximization of value of assets, viability of credit and balancing the interest of the stakeholders. Thus, Resolution Plan filed meets the requirements of Section 30(2) of I B Code, 2016 and Regulations 37, 38, 38(1A) and 39 of IBBI (CIRP) Regulations, 2016. The Resolution Plan is also not in contravention of any of the provisions of Section 29A. The Resolution Professional has also certified that the Resolution Plan approved by the CoCs does not contravene any of the provisions of the law for the time being in force. The Resolution Applicant shall, pursuant to the Resolution Plan approved under Sub-section (1) of Section 31 of the I B Coded, 2016, obtain the necessary approval required under any law for the time being in force within a period of one year from the date of approval of the Resolution Plan by this Authority or within such period as provided for in such law - order of moratorium dated 12.03.2018 passed by this Adjudicating Authority under Section 14 of I B Code, 2016 shall ceased to have effect from the date of passing this Order.
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2019 (10) TMI 101
Admissibility of application - initiation of Corporate Insolvency Resolution Process (CIRP) - Corporate Debtor - HELD THAT:- As no Resolution Plan has been received by this Authority under Sub-section (6) of Section 30 of the I B Code, 2016, before the expiry of the maximum period of 270 days of CIR Process, the Corporate Debtor has to be ordered for Liquidation. This Authority orders the liquidation of the Corporate Debtor viz., M/s. CT Ramanathan Infrastructure Private Limited, which shall be conducted in the manner as laid down in Chapter III of part II of the I B Code, 2016. Application disposed off.
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Service Tax
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2019 (10) TMI 152
Vires of Section 66C(2) and 68(2) of the Finance Act, 1994 r/w. Rule 10 of the Place of Provision of Service Rules, 2012 and Rule 2(1)(d) of the Service Tax Rules - levy of service tax provided by the person in a non-taxable territory - vires of N/N. 01/2017, 14/2017 and 15/2017 - HELD THAT:- The Petitioners have filed the Petition for a declaration in the absence of any of the Petitioner s rights being jeopardized i.e. there are no facts pleaded of the Petitioner s rights being affected and/or threatened. The challenge is made in vacuum i.e. without particulars. Thus, we are not inclined to entertain the Petition. Petition dismissed.
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2019 (10) TMI 100
Attachment of petitioner's bank account - dues payable under Finance Act - HELD THAT:- The CBDT Circular Nos. 984 dated 16th September. 2014 and 1053 dated 10th March, 2017, clearly provide that where a penalty has been deposited 7.5% or 10% as required in terms of Section 35F of C. Ex. Act read with Section 83 of the Act, in respect of an Appeal before the Commissioner (Appeals) or the Tribunal, then the Revenue would not adopt any coercive proceedings - In the present case, it is undisputed that M/s. Sampark (by whom the dues are payable), have deposited 10% of the outstanding demanded under Section 35F of C. Ex. Act in respect of its pending appeal before the Tribunal from the order of Commissioner (Appeals). The above CBDT Circulars, which are binding upon the authorities, prohibit the authorities under the Act from adopting coercive proceedings where such deposits have been made and appeal is awaiting disposal - thus, the continuance of the attachment of the Petitioners Bank Accounts in Allahabad Bank, Kolhapur is in the face of the above binding CBDT Circulars. Therefore, is bad in law. It is thus declared that the attachment of the Petitioners bank account in M/s. Allahabad Bank, Kolhapur by Respondent No.2, as communicated to the Petitioner by letter dated 21st May, 2018 is bad in law - petition allowed - decided in favor of petitioner.
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2019 (10) TMI 99
Mode of discharge of service tax - services provided by service providers located outside India - whether the appellant, as the person liable to pay the service tax on services provided by service providers located outside India, could pay the said service tax by utilization of CENVAT credit available with it? HELD THAT:- The issue is decided in the case of THE COMMISSIONER OF CGST AND CENTRAL EXCISE VERSUS M/S. U.S.V. LIMITED [ 2019 (7) TMI 567 - BOMBAY HIGH COURT] where it was held that there is no bar to utilizing of cenvat credit already availed to discharge service tax obligation on the import of services on reverse charge basis. Appeal allowed.
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2019 (10) TMI 98
Classification of services - Cargo Handling Service or not - activity of loading, transport and unloading of cargo through road, Rail (containers), Road-cum-Rail to different service receivers under composite contracts - CBEC vide circular F.No. B.11/1/2002-TRU, dated 01.08.2002 - HELD THAT:- From the definition of Cargo Handling Services what emerges is that mere transportation of cargo is excluded and there is no doubt that a freight activity of service of transportation of goods will surely be included some manner of loading and unloading of goods. It is found that the assessee themselves do not carry out the activities of loading and unloading per se which are claimed to be carried out by independent contractors. In the present case, it is found that the contracts apparently did not have significant component of Cargo handling other than transportation though a small component of loading and unloading cannot be ruled out. But, however, no separate activity of cargo handling is mentioned nor the rate specified and even the invoices placed on record do not specifically charge for cargo handling nor for loading and unloading. The cargo handling activity alleged by the Revenue is perhaps incidental to the activity of transportation and Revenue s attempt to convert such activities into cargo handling service is too far fetching. The services provided by the appellant cannot be brought under the purview of cargo handling services. The allegation against the assessee on this score cannot sustain - appeal allowed - decided in favor of appellant.
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2019 (10) TMI 97
Computation of taxable value for the period involved - HELD THAT:- Similar issue has come up for consideration before the Tribunal in the case of M/S. CARRIER POINT INFOSYSTEMS LTD. VERSUS C.C.E., JAIPUR-I [ 2017 (4) TMI 1338 - CESTAT NEW DELHI] which is regarding the includibility of the discount given to meritorious student by the Coaching Institute. The appeal is allowed by way of remand to the adjudicating authority to consider the averments made by the appellant.
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Central Excise
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2019 (10) TMI 96
Clandestine removal - cum-duty benefit - demand mainly based on Electricity Consumption - compliance of Section 36 B (2) made for taking computer printout as evidence - principles of natural justice - HELD THAT:- The Ld. Counsel has raised very important issues related to principles of natural justice in as much as whether compliance of Section 36 B (2) was made for taking computer printout, the Ld. Counsel also pointed out that the hard disk from where the computer printout was taken needs to be examined, which will show that whether the data is relevant or it is for the purpose of training as claimed by the appellant. The issue of production capacity vis a vis Electricity consumption also to be examined properly. On these issues proper consideration is required. The matter required reconsideration - matter related to assessees appeals, are remanded to the adjudicating authority for passing a fresh order. Cum-duty benefit - HELD THAT:- Merely because the goods were allegedly cleared clandestinely, Section 4 cannot be applied differently - As regard the doubt raised on the valuation of the goods, we find that in one hand the show cause notice has conclusively arrived at transaction value which is final. There after no question can be raised by the revenue on the value ascertained and duty was computed on such values in the show cause notice - Therefore, the Ld. Adjudicating authority has rightly and legally extended the benefit of cum duty price which we uphold. Appeal allowed by way of remand.
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2019 (10) TMI 95
SSI Exemption - clubbing of clearances - independent units or not - adjudicating authority has dropped the demand holding that all the three units are independent in respect of manufacture and clearance of the goods, therefore, they should not be clubbed - time limitation - Cum-duty benefit - HELD THAT:- The Revenue had filed appeals against all the respondents which further get reinforced on the basis that even though the appellants have raised specific ground for restoration of appeal that the appeals were not filed against M/s Kinitronics and M/s Jolly Enterprises but the same was dismissed, therefore, the issue that the Revenue s appeal was against all the noticees attained finality. The appellants have not challenged either the remand order or the Miscellaneous Order by which the application for restoration of appeal was dismissed. In this position, the appellant has no locus standi to dispute or to raise the issue that the Revenue s appeal was only against one party i.e. M/s Jolly Electrical Industries. We therefore, hold that the Revenue s appeal was filed against all the noticees before this Tribunal; therefore, the issue related to all the noticees were open before the adjudicating authority in de novo adjudication. The appellants have strongly argued that the present adjudicating authority has not considered the findings of fact narrated by the predecessor Commissioner in the first Adjudication Order dated 06.10.1995. In this regard, we find that the first adjudication order was set aside in the Revenue appeal, therefore, the present adjudicating authority is not judicially required to look into the said order as the same was not in existent. Once, the earlier adjudication order was set aside the entire case has gone back to the stage of SCN and thereafter since the entire matter was kept open the present adjudicating authority was free to take independent view on the overall case without getting influenced by the first order and finding of the predecessor Commissioner, therefore, the submission of the Ld. Counsel on this count is fatal and cannot be accepted. The dropping of modvat demand has no impact as far as clandestine removal of goods manufactured and cleared by M/s Jolly Electrical Industries in the guise of manufacture and clearances of M/s Kinitronics and M/s Jolly Enterprises, therefore, merely because the case proceedings of modvat credit has been dropped against M/s Kinitronics and M/s Jolly Enterprises it will not affect the case of clandestine removal against M/s Jolly Electrical Industries, therefore, this argument is of no help to the appellant. Time limitation - HELD THAT:- M/s Jolly Electrical Industries were indulged into clandestine removal of excisable goods to intention to evade duty in the guise of manufacture and clearance of goods from M/s Kinitronics and M/s Jolly Enterprises, there is a clear fraud, suppression of fact, misstatement, collusion with intention with evade duty, therefore, as per the facts of the present case it is a fit case to invoke the extended period, therefore, the demand for extended period is clearly sustainable. Benefit of cum-duty price - HELD THAT:- The appellant is entitled for the cum duty benefit. Accordingly, the demand of duty and corresponding penalty needs to be recomputed by extending the benefit of cum duty price. The appeals are dismissed except for the re-quantification of the duty by extending the cum duty price - appeal disposed off.
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CST, VAT & Sales Tax
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2019 (10) TMI 154
Adjustment of amounts paid under the earlier Amnesty Scheme - amounts payable under the Amnesty Scheme of 2019 - prayer of the petitioners therefore is that the amounts paid by them under the erstwhile Scheme be treated as payments under the 2019 Scheme, so that the amounts paid by them will be given credit under tax as per the present Scheme - HELD THAT:- From a perusal of the Amnesty Scheme for settlement of arrears introduced by the Kerala Finance Bill, 2019 and as clarified by Circular No.3/2019 dated 1.4.2019 of the Commissioner of State Goods and Services Tax Department, Government of Kerala, that the 2019 Scheme clearly contemplates that the assessees, who have opted for Amnesty Scheme earlier, but could not settle the arrears, can opt for the benefit under the 2019 Scheme. It is made clear that amounts if any paid during the earlier Schemes will be given credit under tax as per the 2019 Scheme. In the light of the clear provisions in the 2019 Scheme, whereby, amounts paid during the earlier Schemes will be given credit under tax as per the 2019 Scheme, the petitioners are permitted to withdraw these writ petitions, without prejudice to their right to move under the 2019 Amnesty Scheme, for settlement of the arrears of tax. Petition dismissed as withdrawn.
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2019 (10) TMI 94
Classification of goods - compressed air and cooled air - whether rightly assessed to tax under Entry No. 55 (All type of gases such as Oxygen, Hydrogen etc.,) of Part III of Schedule II of the M.P. Vanijyik Kar Adhiniyam, 1994 in the reassessment, instead of residuary Entry No. 39 of Part IV, Schedule II, of the M. P. Vanijyik Kar Adhiniyam, 1994 as in the original assessment? HELD THAT:- As per the definition of air, as defined under the Oxford Dictionary, 'air' is a noun and is defined as invisible gaseous substance surrounding the earth, a mixture mainly of oxygen and nitrogen. The Cambridge Dictionary defines 'air' as mixture of gases that surrounds the earth and that we breathe - Entry 55 makes it very clear that it includes different types of gases. The opening sentence of the entry includes 'all types of gases' and the sentence completes with the words 'etc.,'. The interpretation of the entry makes it very clear that all types of gases whether it is Oxygen, Hydrogen or mixture of gases are to be treated under Entry 55 Part III schedule II. In the present case, the assessee is supplying compressed air and cooled air and, therefore, the compressed air includes all types of gases. It has to be charged under Entry 55 Part III schedule II. The apex Court in the case of ROYAL HATCHERIES PVT. LTD. VERSUS. STATE OF AP [ 1993 (10) TMI 85 - SUPREME COURT] has held that the rule-making authority chose to limit the meaning of 'livestock' in the said clause only to domestic animals mentioned therein and it was also held that the use of words 'such as' indicate that what are mentioned thereafter are only illustrative and not exhaustive - It was also held that the clause which is subject matter of scrutiny in the aforesaid case, ends with the words 'etc.,' which does mean that some more domestic, in addition to those specifically mentioned therein, are also included within the meaning of the word 'all domestic animals'. Thus, this Court is of the considered opinion that the entry No. 55 Part III Schedule II is very specific and clear on the subject as all type of gases such as Oxygen and Nitrogen are covered under it and air which is also a mixture of Oxygen and Hydrogen and some other gases are also included under Entry 55 Part III of Schedule II - decided in favor of Revenue.
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2019 (10) TMI 93
Cancellation of petitioner's registration as a Sales Tax Practitioner - section 82(2) (iii) of the Maharashtra Value Added Tax Act, 2002 - main contention raised by the Petitioner is that the proceedings taken against the Petitioner are in breach of principles of natural justice - HELD THAT:- No reply is filed to this petition and the contention of the Petitioner with regard to breach of principles of natural justice has gone uncontroverted. The learned AGP had sought time to take instructions. The learned AGP submits that she has received instructions that the Officers are ready to give inspection of necessary documents to the Petitioner so that the Petitioner can effectively put up his case - In view of categorical stand taken by the Respondents as above, we do not find any impediment in accepting the Petitioner's contention and disposing of the petition. Impugned order set aside - the matter is restored to the status of receipt of show-cause-notice by the Petitioner.
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